The EU has ordered Britain to scrap the Internal Market Bill by the end of September, but Britain has refused and said its parliament was sovereign above international law.
It means the ongoing trade talks between the two sides – this week has seen the eighth round of discussions – are now seen as being at serious risk of collapse.
Talks are due to resume in Brussels on Monday but, with possible legal action by the EU against the UK, there seems to be little chance of progress.
The current situation took a serious turn for the worse when, after a meeting in London on Thursday, Commission Vice-President Maroš Šefčovič demanded that Britain scrap the Bill by the end of September.
Michael Gove, Chancellor of the Duchy of Lancaster, said the UK would not withdraw the legislation and it was “absolutely serious about implementing the Northern Ireland protocol.” He said the UK parliament would debate the bill on Monday.
“I trust the British government to implement the Withdrawal Agreement, an obligation under international law and prerequisite for any future partnership” Ursula von der Leyen, Commission President
The Bill addresses the Northern Ireland Protocol - an element of the Brexit Withdrawal Agreement designed to prevent a hard border returning to the island of Ireland.
The language used by the EU was uncommonly sharp and in a statement on Thursday evening, Šefčovič reminded the UK government that the Withdrawal Agreement contains a number of mechanisms and legal remedies to address violations of the legal obligations contained in the text, adding, “which the European Union will not be shy in using.”
Commission President Ursula von der Leyen also weighed into the row, saying, “I trust the British government to implement the Withdrawal Agreement, an obligation under international law and prerequisite for any future partnership.”
She added, “Protocol on Ireland/Northern Ireland is essential to protect peace and stability on the island and integrity of the single market.”
However, the UK Business Minister Nadhim Zahawi defended the legislation as necessary in case existing “ambiguities” in the Withdrawal Agreement are not settled through the formal dispute resolution process.
“It's not about if we implement the Withdrawal Agreement and the Northern Irish protocol, it’s how we implement it” Nadhim Zahawi, UK Business Minister
“It's not about if we implement the Withdrawal Agreement and the Northern Irish protocol, it’s how we implement it.”
Concerned UK Conservative MPs have launched a bid to amend the new law but it is unclear if, with Prime Minister Boris Johnson enjoying a healthy majority in the Commons, they can generate enough support to win the day.
Even the Tories former party leader Michael Howard, a europhile who supported Brexit, said it was “a very sad day last week when the Northern Ireland secretary, Brandon Lewis, admitted that amending the UK’s Brexit deal with the EU will break international law.”
The Irish EU affairs minister Thomas Byrne said the UK government’s claims that it was to protect the peace process were “completely false.”
He said what would happen as a result of this bill becoming law was “completely unthinkable.”
Germany’s ambassador to the UK said that in 30 years as a diplomat he had not “experienced such a fast, intentional and profound deterioration of a negotiation.”
Britain left the EU in January, but is now in a transition period during which it has access to EU markets. It was given a year to agree a new trade deal with the EU.
On Friday, a European Parliament spokesman told reporters at a briefing that group leaders will discuss the current impasse with Michel Barnier, the EU’s chief Brexit negotiator, at a meeting in Brussels early next week.