Spain has agreed to allow European Commission observers to its border with Gibraltar to assess the legality of checks on traffic that caused a diplomatic row with Britain.
The Commission said Spanish prime minister Mariano Rajoy had agreed to allow a team in "as soon as possible" in a telephone call with President Jose Manuel Barroso to discuss the dispute.
Three Royal Navy ships, led by frigate HMS Westminster, arrived at the British Overseas Territory for a routine stopover on Monday as Downing Street declined to rule out the use of retaliatory political action against Spain if the disagreement was not resolved quickly.
On Sunday more than 40 commercial Spanish boats staged a protest over a controversial artificial reef off Gibraltar which sparked the disagreement and led to the border checks, which have led to hours of delays for those crossing into Gibraltar.
In a statement issued after the telephone call between the two politicians, the Commission said: "They agreed that a Commission fact-finding mission should as soon as possible examine in loco the border control / movement of people and goods questions.
"President Barroso expressed his hope that Spain and the UK will address these matters in a way that is in line with their common membership in the EU."
It has been reported that UK officials are examining the potential to disrupt Spain's lucrative tourist industry as well as blocking its policy initiatives at the EU.
Pressed repeatedly on the potential for such action, a Number 10 spokesman told reporters: "Our preference here is to resolve this via political means and through dialogue with the Spanish government.
"We clearly want to reach a quick resolution which is acceptable and brings an end to these totally disproportionate border checks."
Asked if David Cameron was confident of securing a swift resolution, he said: "We will do what we need to do to bring this to a satisfactory conclusion."
A Gibraltar government spokesman said it welcomed the intervention of the EU.
"As far as we are concerned we feel that they (the border checks) are over the top and the British Government has said exactly the same," he said.
Yesterday's protest prompted calls for renewed efforts, involving the European Union, to solve the diplomatic dispute which has seen Madrid introduce additional checks at the border in protest at what it sees an encroachment on its fishing rights, leaving workers and tourists facing hours in queues to get through.
Fabian Picardo, the Gibraltarian chief minister, reiterated today that the long delays for vehicles crossing the border were not acceptable.
"The officiousness of what is going on now is so clearly directed politically, and it's quite unfair because it's being visited on innocent people that need to cross the frontier," he told BBC Breakfast.
Type 23 frigate HMS Westminster was greeted by cheering locals when she arrived in Gibraltar along with the Royal Fleet Auxiliary ships Mounts Bay and Lyme Bay for a scheduled visit.
They are taking part in Cougar '13 exercises in the Mediterranean, a long-planned deployment involving four Royal Navy warships, the lead commando group from 3 Commando Brigade Royal Marines and elements of naval air squadrons.
The operation also includes the helicopter carrier HMS Illustrious and the navy's flagship HMS Bulwark.
A Spanish Guardia Civil patrol boat passed close to the military area of Gibraltar harbour not long after HMS Westminster arrived this morning.
The Spanish boat passed outside the harbour walls in Gibraltar Bay before speeding off when a police launch approached it.
Julie Girling, the Conservative MEP for the South West and Gibraltar, is in the territory for talks with local politicians.
"I think what the people of Gibraltar have really appreciated with the arrival of Westminster today, and the two support ships, is that it is flying the flag, it is saying 'we British people support the Gibraltarians, we are not abandoning you', and that has been very, very welcome," she said.
"If this situation continues, if the pressure on Gibraltar continues, then of course I think the people of Gibraltar would like to see a bit more of that."
In a statement posted online Mr Rajoy said he would like to see dialogue between his country and Britain and had invited Mr Barroso to send a delegation to Spain.
But it added that Mr Rajoy told the EC president Spain was "exercising its legal duties by establishing random, proportional and non-discriminatory controls on the border".
"The Spanish president reiterated that the unilateral act of dumping blocks of cement into the waters of the bay of Algeciras by the Gibraltarian authorities is unacceptable and is a violation of environmental legislation," it said.
"In this respect, he mentioned that the government of Spain already reported this violation of European environmental legislation when it took place to the general secretary of the EC. The government of Spain is waiting for the commission to reply.
"Additionally, Rajoy expressed the need to verify and control that economic activity in Gibraltar does not infringe European legislation relating to money laundering, contraband and taxation.
"The Spanish president has manifested that his government will apply legal measures in defence of Spanish and European legality and the interests of Spain and the Spanish people."
Sir Graham Watson, Lib Dem MEP for the South West of England and Gibraltar, welcomed the decision by the European Commission to send monitors to the Spain-Gibraltar border.
"I am pleased that the commission president has heeded my call for monitors," he said, "something that I have been calling for since the spring. These politically motivated checks are unwarranted and must be brought to a halt.
"Spain's actions are nothing short of harassment. The residents of Gibraltar have every right to cross the border under EU law.
"But this cannot just be a token response. I am asking president Barroso to ensure the mandate of these monitors is extended until Spain agree to only carry out checks that are proportionate to the threat posed. Anything short of this is unacceptable."