EU mulls legal action against Britain over plan to break Brexit deal

Britain Brexit

By Paul Sandle and Gabriela Baczynska

LONDON/BRUSSELS (Reuters) - Britain and the European Union will hold emergency talks on Thursday over Prime Minister Boris Johnson's plan to undercut parts of the Brexit divorce treaty, with Brussels exploring possible legal action against London.

As Britain pushes ahead with its plan to 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 at 1200 GMT and chief negotiators Michel Barnier and David Frost will hold trade talks.

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UK and EU set for crunch talks
Britain's Prime Minister Boris Johnson waves as he leaves 10 Downing Street in central London on September 9, 2020, to attend Prime Minister's Questions (PMQs) at the House of Commons. - Britain readied on Wednesday to intentionally breach its EU divorce treaty with new legislation that critics warned would undermine its global standing and any hopes for an orderly exit out of the world's biggest single market. Johnson's government was to submit a new bill governing the UK's own internal market across its devolved nations, to take effect after the expiry of a transition period out of European Union membership in December. (Photo by Ben STANSALL / AFP) (Photo by BEN STANSALL/AFP via Getty Images)
EU chief Brexit negotiator Michel Barnier (L) and EU ambassador to the UK Joao Vale de Almeida (R) both wearing a facemasks as a precaution against the transmission of the novel coronavirus walk out of London St Pancras station after arriving in London on September 9, 2020 for the latest round of trade talks with the UK. - Britain readied on on September 9 to intentionally breach its EU divorce treaty with new legislation that critics warned would undermine its global standing and any hopes for an orderly exit out of the world's biggest single market. Prime Minister Boris Johnson's government was to submit a new bill governing the UK's own internal market across its devolved nations, to take effect after the expiry of a transition period out of European Union membership in December. (Photo by ISABEL INFANTES / AFP) (Photo by ISABEL INFANTES/AFP via Getty Images)
Britain's Prime Minister Boris Johnson waves as he leaves 10 Downing Street in central London on September 9, 2020, to attend Prime Minister's Questions (PMQs) at the House of Commons. - Britain readied on Wednesday to intentionally breach its EU divorce treaty with new legislation that critics warned would undermine its global standing and any hopes for an orderly exit out of the world's biggest single market. Johnson's government was to submit a new bill governing the UK's own internal market across its devolved nations, to take effect after the expiry of a transition period out of European Union membership in December. (Photo by Ben STANSALL / AFP) (Photo by BEN STANSALL/AFP via Getty Images)
EU's chief negotiator Michel Barnier (left) arriving from the Eurostar with EU Ambassador to the UK, Portuguese diplomat Joao Vale de Almeida at St Pancras International railway station, London, for the latest round of the negotiations on a free trade deal between the EU and the UK. (Photo by Aaron Chown/PA Images via Getty Images)
Britain's Prime Minister Boris Johnson waves as he leaves 10 Downing Street in central London on September 9, 2020, to attend Prime Minister's Questions (PMQs) at the House of Commons. - Britain readied on Wednesday to intentionally breach its EU divorce treaty with new legislation that critics warned would undermine its global standing and any hopes for an orderly exit out of the world's biggest single market. (Photo by Ben STANSALL / AFP) (Photo by BEN STANSALL/AFP via Getty Images)
EU's chief negotiator Michel Barnier (left) arriving from the Eurostar with EU Ambassador to the UK, Portuguese diplomat Joao Vale de Almeida at St Pancras International railway station, London, for the latest round of the negotiations on a free trade deal between the EU and the UK. (Photo by Aaron Chown/PA Images via Getty Images)
LONDON, Sept. 8, 2020 -- British Prime Minister Boris Johnson walks back to 10 Downing Street in London, Britain, Sept. 8, 2020. Crucial talks aimed at finding a post-Brexit trade deal between Britain and the European Union (EU) opened Tuesday in London. Boris Johnson said Monday that he wants a post-Brexit trade deal agreed with EU by an Oct. 15 deadline, warning that a failure of that could mean London ending its EU membership with no deal. (Photo by Han Yan/Xinhua via Getty) (Xinhua/Han Yan via Getty Images)
LONDON, Sept. 8, 2020 -- Photo taken on Sept. 8, 2020 shows a general view of the Houses of Parliament in London, Britain. Crucial talks aimed at finding a post-Brexit trade deal between Britain and the European Union (EU) opened Tuesday in London. Boris Johnson said Monday that he wants a post-Brexit trade deal agreed with EU by an Oct. 15 deadline, warning that a failure of that could mean London ending its EU membership with no deal.(Photo by Han Yan/Xinhua via Getty) (Xinhua/Han Yan via Getty Images)
LONDON, Sept. 8, 2020-- Photo taken on Sept. 8, 2020 shows the European Parliament Liaison Office in the United Kingdom in London, Britain. Crucial talks aimed at finding a post-Brexit trade deal between Britain and the European Union (EU) opened Tuesday in London. Boris Johnson said Monday that he wants a post-Brexit trade deal agreed with EU by an Oct. 15 deadline, warning that a failure of that could mean London ending its EU membership with no deal. (Photo by Han Yan/Xinhua via Getty) (Xinhua/Han Yan via Getty Images)
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If unhappy with what London says, the EU 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 other EU officials said the Commission would analyze Britain's proposed Internal Market Bill - overriding parts of the Withdrawal Agreement - once it is passed to take account of amendments before making a final decision on the legal case.

A note distributed by the EU executive to the 27 EU member states said the bloc could start so-called infringement procedures against Britain.

The British government says its planned law, put forward on Wednesday, merely clarifies ambiguities in the Withdrawal Agreement, but also says its main priority is the 1998 Northern Irish peace deal that ended decades of violence. It said the bill would be debated on Monday.

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.

Sterling was flat at $1.2999 though overnight sterling implied volatility rose to 13%, its highest since March 26, and the FTSE 100 share index slipped.

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Talks on a trade deal have snagged on state aid rules and fishing. Without an agreement, nearly $1 trillion in trade between the EU and Britain could be thrown into confusion at the beginning of 2021 as they also deal with the economic impact of the coronavirus pandemic.

The latest dispute centers on rules for Northern Ireland, which shares a land border with EU member Ireland. Under the 1998 agreement, 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.

U.S. House of Representatives Speaker Nancy Pelosi said any potential U.S.-UK trade deal would not pass the U.S. Congress if Britain undermined the 1998 agreement.

Former British leaders Theresa May and John Major scolded Johnson for considering an explicit, intentional breach of international law.

"If we lose our reputation for honoring 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.

"I'm not optimistic at this stage," Irish Prime Minister Micheal Martin told national broadcaster RTE when asked how confident he was in a trade deal being reached. He said trust in negotiations had been undermined, making it harder to secure a free trade agreement without tariffs and quotas.

(Writing by Guy Faulconbridge; Additional reporting by William James and Elizbath Piper in London, Padraic Halpin in Dublin and John Chalmers in Brussels; Editing by Kim Coghill, Peter Graff and Timothy Heritage)

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