A Foreign Office source said it would amount to “Spanish boots on the ground” in Gibraltar and would be rejected by London.
The intervention came the day before Government ministers are expected to warn Brussels to change the Northern Ireland protocol or face its collapse.
Brussels must help find a way to resolve the problems with the Northern Ireland Protocol within three months or the UK will look at ways to work around it, ministers are expected to say on Wednesday.
In joint statements in the House of Commons and House of Lords, Lord Frost and Brandon Lewis are likely to stress that the Province needs arrangements because the Protocol is not working.
The ministers will not at this stage rip up the Brexit agreement, by invoking Article 16 of the Protocol unilaterally, as the European Union briefly did in January in a row over access to Covid-19 vaccines.
The pair are likely to call for a “new balance” so that goods can move as freely as possible between the two customs territories, and then threaten to invoke Article 16 if there is no progress by Sept 30.
A Whitehall source said the ministers are likely to make clear that the talks over the Protocol are now in the ‘last chance saloon’ and stress that invoking Article 16 is not off the table.
The row over Gibraltar, a British Overseas Territory with a land border with mainland Spain, was triggered after Brussels published its proposals for negotiations about the border.
‘Why the hell is the EU trying to undermine us?’
Foreign Office sources said the proposals amounted to having Spanish border guards rather than EU border guards checking people and goods crossing the border.
It triggered a heated reaction and has been interpreted by some Whitehall figures as an attempt by Brussels to gain leverage for talks over the Northern Ireland Protocol.
In a statement Mr Raab said: “The UK, with Gibraltar, and Spain carefully agreed a pragmatic Framework Agreement, in full consultation with the EU Commission. The Commission’s proposed mandate, published today, directly conflicts with that Framework. It seeks to undermine the UK’s sovereignty over Gibraltar, and cannot form a basis for negotiations.
“We have consistently showed pragmatism and flexibility in the search for arrangements that work for all sides, and we are disappointed that this has not been reciprocated. We urge the EU to think again.”
A Foreign Office source told The Telegraph: “This means Spanish boots on the ground. If the UK, Spain and Gibraltar agree on this, why the hell is the EU trying to undermine us and create this mess. We have consistently warned them that this would not be acceptable to us.”
Boris Johnson, the Prime Minister who is isolating at his Chequers country mansion, pressed the UK case for the Protocol to be overhauled in a telephone call with the Irish Prime Minister Micheal Martin on Tuesday.
A Downing Street spokesman said: “The Prime Minister emphasised that the way the Protocol is currently operating is causing significant disruption for the people in Northern Ireland.
“He made clear the UK Government’s commitment to protecting the Belfast (Good Friday) Agreement in all its dimensions. He said the EU must show pragmatism and solutions needed to be found to address the serious challenges that have arisen with the Protocol.”
Protocol causing ‘significant disruption’
The Protocol was agreed between the UK and EU to keep trade flowing smoothly on the island of Ireland and avoid checkpoints.
It means Northern Ireland has a different status to the other UK nations by remaining inside the EU’s customs union and single market or goods.
Article 16 can be invoked when the Protocol is seen to be leading to serious “economic, societal or environmental difficulties”.
The UK has blamed the EU for using disproportionate checks in the Irish Sea between Great Britain and Northern Ireland which has slowed goods arriving in the Province.
The Government has complained that the EU is carrying out 20 per cent of all of its external border checks across the entire trading bloc at the so-called ‘sea border’ in the Irish Sea.
Hardline Brexiteers call for new law
Hardline Brexiteer Conservative and DUP MPs want the Government to take assertive action to deal with the issues surrounding the Protocol, such as a new law in the UK Parliament to replace the Protocol.
One suggestion in Westminster on Tuesday was that ministers will threaten to bring forward legislation in Parliament to replace the Protocol, although this was strongly denied by Downing Street sources.
One Brexiteer Tory MP said that invoking Article 16 invited the risk of retaliatory measures from the EU, adding: “Why not break the logjam altogether and just legislate?”
Maros Sefcovic, the EU’s Brexit negotiator who also held talks with Lord Frost on Tuesday, is understood to have been pressing DUP representatives at a meeting on Monday if he knew what the UK had planned.
Sir Jeffrey Donaldson, the DUP leader, said: “The Protocol has not worked. Even those who supported its rigorous implementation recognise that. The barriers and distortion to trade within the UK internal market brought about by it must be swept away and not replaced.
“We have pressed the UK Government to that end. Both the Government and the EU must now renegotiate. If the EU is unwilling to recognise the harm caused by the Protocol, then the UK Government must take appropriate unilateral action using Article 16.”