Previously, under the British Nationality Act 1981, residents of the Falkland Islands were classed as British Dependent Territories citizens, unless they were also connected with the UK itself (such as through having a UK-born parent or grandparent). Such citizens were restricted in their right to enter and stay in the United Kingdom. The new Act conferred full British citizenship on the residents of the Falkland Islands and gave them similar status to that of citizens in Gibraltar.
The Act was passed mainly in response to the Falklands War, which was fought between the United Kingdom and Argentina over the sovereignty of the islands. The United Kingdom maintained that it would stand by the principle of self-determination of allowing the Falkland Islanders to decide their own destiny, which was ultimately to be British citizens. It had been argued that the British Nationality Act 1981 had indicated British reluctance to hold the islands, as the residents were not legally full British citizens, and after the war ended in victory for the British, this Act was passed to clarify the United Kingdom's commitment to the islands.
The Act has been superseded by the British Overseas Territories Act 2002, which granted full British citizenship to all British overseas territories, including the Falkland Islands.