The EU has begun legal proceedings against the UK after it refused to ditch plans to override sections of its Brexit divorce deal.
An EU deadline for the government to remove sections of the Internal Market Bill expired on Wednesday.
The “letter of formal notice” could eventually lead to a court case against the UK at the European Court of Justice, the EU’s top court.
But the EU has not walked away from talks over a post-Brexit trade deal.
European Commission President Ursula von der Leyen said the UK would have until the end of November to respond to the EU’s concerns over the draft legislation.
UK-EU trade talks are continuing in Brussels this week. Prime Minister Boris Johnson has said both sides should “move on” if a deal was not reached by mid-October.
In a brief statement, Mrs von der Leyen said the bill was a “full contradiction” of previous UK commitments over how a hard border on the island of Ireland should be avoided.
She added that the bill was by its “very nature a breach of the obligation of good faith” contained in the withdrawal deal that took the UK out of the EU in January.
A spokesperson for the UK government said the bill was a necessary “safety net” to protect trade between different parts of the UK.
They added the government would respond the EU’s letter “in due course”.
MPs gave their final backing to the bill earlier this week. However, it will have to be approved by the House of Lords before it becomes law.
In a bid to head off a potential rebellion from Tory backbenchers, ministers have granted the Commons a say before powers to override the Brexit divorce deal could be used.
The letter sent to the UK is the first stage in the process the Commission uses against countries it believes have broken EU law.
It can end with the Commission taking governments to court at the European Court of Justice.
The court has powers to force countries to comply with its rulings, including by imposing financial penalties.
However, most cases are settled before then – and it can take many years for a case to move through the court.
What is the Internal Market Bill?
The bill sets out rules for the operation of the UK internal market – trade between England, Scotland, Wales and Northern Ireland – after the end of the Brexit transition period in January.
- No new checks on goods moving from Northern Ireland to the rest of Great Britain
- Giving UK ministers powers to modify or “disapply” rules relating to the movement of goods that will come into force from 1 January if the UK and EU are unable to reach an alternative agreement through a trade deal
- Powers to override previously agreed obligations on state aid – government support for businesses.
The bill explicitly states that these powers should apply even if they are incompatible with international law.
Ministers say the legislation is needed to prevent “damaging” tariffs on goods travelling from the rest of the UK to Northern Ireland if negotiations with the EU on a free trade agreement fail.