* UK says its plans may be inconsistent with the law
* EU deeply concerned over Johnson's plans
* Irish PM not optimistic about chances of a trade deal
* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv
(Adds details of EU position, updates sterling)
By William James and John Chalmers
LONDON/BRUSSELS, Sept 10 (Reuters) - The European Union was
on Thursday exploring possible legal action against Britain over
Prime Minister Boris Johnson's plan to undercut parts of the
Brexit divorce treaty, with EU officials saying London may
already be in breach of the treaty.
As Britain pushed ahead with its plan to act outside
international law by breaching its divorce treaty with the bloc,
EU officials said it may have already violated the treaty's good
faith obligations by declaring it could renege on parts of it.
With chances of a messy Brexit growing, European Commission
Vice President Maros Sefcovic expressed concern about the plan
before a meeting with senior British minister Michael Gove in
London as chief negotiators met for trade talks.
EU diplomats and officials said the bloc could use 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.
One EU source said Britain would not succeed if it tries to
use the planned breach of the Withdrawal Agreement as a threat
to extract concessions from the bloc in trade talks.
"If they try to do that, it will fail," the EU source said.
A note distributed by the EU executive to member states said
London may have broken the treaty's good faith obligations.
The British government says it is committed to the treaty
and that a proposed law overriding parts of the Withdrawal
Agreement merely clarifies ambiguities. Its main priority, it
says, is the 1998 Northern Irish peace deal that ended decades
of violence.
In a sign London was not backing down, 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. Britain signed the
treaty and formally left the EU in January, but leaves the EU's
single market only when a transition agreement expires at the
end of this year.
The pound, which tends to fall when Brexit hits a snag, fell
against the dollar and the euro. It has dropped below 92 pence
per euro for the first time since March.
European Central Bank chief Christine Lagarde said she was
carefully monitoring developments.
IRELAND
Talks on a trade deal have been stuck over 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
start of 2021, compounding the economic impact of the
coronavirus pandemic.
The latest dispute centres 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, the British-EU divorce pact calls for
Northern Ireland to continue to apply some EU rules. But
Britain's new bill, unveiled this week, would assert the power
to override many of those EU rules, acknowledging that London
would be violating international law by doing so.
U.S. House of Representatives Speaker Nancy Pelosi said any
move by Britain that undermined the 1998 peace agreement would
ensure that a potential U.S.-UK trade deal would not pass the
U.S. Congress.
Former British leaders Theresa May and John Major scolded
Johnson for considering an explicit, intentional breach of
international law. Major said Britain would lose "our reputation
for honouring the promises we make."
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 views 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 the EU and Britain reaching a trade deal.
(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)