Britain and the European Union are set to hold emergency talks over Prime Minister Boris Johnson's plan to undercut parts of the Brexit divorce treaty, with Brussels exploring possible legal action against London.
After Britain explicitly said it would act outside international law by breaching the divorce treaty, EU negotiators are trying to gauge how to deal with London.
European Commission Vice President Maros Sefcovic will meet British counterpart Michael Gove in London on Thursday alongside scheduled trade talks between chief negotiators Michel Barnier and David Frost.
If the EU is unhappy with what London says, it could use a part of the Withdrawal Agreement to take legal action against Britain, though there would be no resolution before the end-of-year deadline for Britain's full exit.
"The dispute-settling mechanism under the Withdrawal Agreement is there," an EU diplomat dealing with Brexit told Reuters.
Two EU officials also involved in the talks said the Commission would analyse Britain's proposed Internal Market Bill - overriding parts of the Withdrawal Agreement - once it is passed to take into account any amendments before making a final decision on the legal case.
The British government says its planned law merely clarifies ambiguities in the Withdrawal Agreement, but also says its main priority is the 1998 Northern Irish peace deal.
Europe's leaders have been handed an ultimatum: accept the treaty breach or prepare for a messy divorce when Britain disentangles itself from the EU at the end of the year.
Britain signed the treaty and formally left the EU in January, but remains a member in all but name until the end of 2020 under a status quo agreement.
Talks on a trade deal have snagged on state aid rules and fishing.
Without an agreement, nearly $US1 trillion in trade between the EU and Britain could be thrown into confusion at the beginning of 2021, a further economic blow as they deal with the coronavirus pandemic.
The latest dispute centres on rules for Northern Ireland, which shares a land border with EU member Ireland. Under the 1998 Good Friday peace agreement that ended decades of violence, there must be no hard border in Ireland.
To ensure that, Britain's EU divorce agreement calls for some EU rules to continue to apply in Northern Ireland. But Britain wants power to override many of them, acknowledging this would violate international law.
US House of Representatives Speaker Nancy Pelosi said any potential US-UK trade deal would not pass the US Congress if Britain undermined the 1998 agreement.
Former British leaders Theresa May and John Major scolded Johnson, whose government put forward the Internal Market Bill on Wednesday, for considering an explicit, intentional breach of international law.
"If we lose our reputation for honouring the promises we make, we will have lost something beyond price that may never be regained," Major said.
European diplomats said Britain was playing a game of Brexit "chicken", threatening to wreck the process and challenging Brussels to change course. Some fear Johnson may view a no-deal exit as a useful distraction from the pandemic.
Australian Associated Press