THERESA May has been warned that European Union law will continue to apply in the UK after Brexit as it emerged the Prime Minister will set out her Brexit strategy next Tuesday.
The Prime Minister of Malta, whose country recently took over the the EU's rotating presidency, issued the warning while discussing a 'transition' period, designed to smooth the UK's path out of EU.
Conservative ministers have indicated that they are interested in such an agreement.
Read more: Theresa May's government is as big a threat to the Union as the SNP, says Labour MP
The idea is also popular with business leaders, who fear falling off a 'cliff edge' at the end of two years of official Brexit negotiations.
But the thought that EU law will continue to apply in the UK for years will infuriate Brexiteers.
The row comes as Mrs May prepares to make her much-anticipated speech on her government’s Brexit plans next week.
Maltese leader Joseph Muscat said that it was “quite obvious” that the City could be in line for a transition deal.
But he added a note of caution.
“It is not a transition period where British institutions take over, but it is a transition period where the European court of justice is still in charge of dishing out judgments and points of view,” he said.
Number 10 sources have confirmed that the Prime Minister will make her long-awaited speech next Tuesday.
It could come just days before the Supreme Court decides whether or not MPs or the devolved assemblies must vote before Mrs May can trigger the exit talks.
Read more: Theresa May's government is as big a threat to the Union as the SNP, says Labour MP
Fears have been expressed that the process could be delayed if judges decide that the legislation surrounding the Good Friday Agreement means that members of the Stormont Assembly should get a vote.
The UK Government has said it is "likely" that there will be fresh elections in Northern Ireland following the shock resignation of the Deputy Prime Minister Martin McGuinness earlier this week.
No 10 said that Mrs May's Brexit speech would be on "global Britain and continuing to be an outward-looking nation”.
The Prime Minister is under pressure to spell out her strategy for the upcoming negotiations.
Both the Foreign Secretary Boris Johnson and the Brexit Secretary David Davis are understood to be contributing to the content of the speech
Opposition parties have attacked the Prime Minister for secrecy over the Government's exit plans, which they argue is damaging the chances of a successful outcome.
Read more: Theresa May's government is as big a threat to the Union as the SNP, says Labour MP
But the Conservatives have defended their stance insisting that they cannot set out their hand without giving a massive advantage to the other 27 EU member states.
Mrs May's official spokeswoman said: "She will be making a speech on Tuesday, setting out more on our approach to Brexit, as part of preparing for the negotiations and in line with our approach for global Britain and continuing to be an outward-looking nation."
Meanwhile, there were reports that the City had given up trying to keep lucrative 'passporting' rights after Brexit.
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