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The warnings came as the June 30 deadline passed for millions of EU citizens living in the UK to register for “settled status”. Under the scheme, Europeans living in Britain had to apply to retain the right to remain, claim benefits and use healthcare services. The 2019 Brexit Withdrawal Agreement guarantees the rights of citizens living on either side of the Channel.

But some EU member states are unhappy with the way the British Government has gone about registering Europeans living in the country.

Diplomats have urged the Commission to launch legal action under the Brexit divorce deal if the situation doesn’t improve.

Under the British scheme, EU nationals who had lived in the UK for five years before December 31, 2020, would be given settled status.

Those who had not completed the full five years’ residency would receive “pre-settled status”.

EU diplomats claimed the decision to make people reapply for settled status after the five-year period was in breach of the Withdrawal Agreement.

If European nationals do not apply to upgrade their “pre-settled status” they risk losing their rights in Britain.

One diplomat told the FT: “Missing the deadline for settled status for EU citizens with pre-settled status after accumulating five years of residence in the UK cannot lead to the automatic loss of their status.”

A second insider said the issue had been raised numerous times by Brussels in discussions with the British Government.

The official added: “We believe the citizens should be placed above the fray.”

Sources said the bloc was pondering whether legal action is the best route to force a British U-turn on the matter.

“Legal options will indeed be looked into,” another diplomat said.

And a third suggested the legal proceedings could start as early as next month if progress is not made during technical discussions between UK and EU officials.

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Wrangling over the issue was said to have been “very frank” in recent weeks.

More than 2 million European citizens out of more than 5.6 million who have applied for settled status have only been granted pre-settled status.

Experts have warned this the large number means many will not understand or forget that they need to reapply.

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Catherine Barnard, a professor of EU law at Cambridge University, said it was not clear under the Withdrawal Agreement whether a person with pre-settled status should lose their residency rights if they fail to convert to full settled status.

She added: “Even though UK law appears to envisage that anyone that doesn’t apply will lose their rights to reside in the UK, the Withdrawal Agreement – which his directly enforceable in the UK – says they have the right to reside permanently once they have completed five years.”

Home Secretary Priti Patel has said the Government will be “compassionate, proportionate and pragmatic” in handling cases of those who missed the deadline.

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