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The UK government’s decision to drop a court case over the rights of Europeans to remain in the country has been welcomed by the bloc’s watchdog for citizens’ interests.

The Independent Monitoring Authority for the Citizens’ Rights Agreements said on Thursday it was pleased the Home Office would not proceed with an appeal against a UK High Court judgment regarding the rights of people with pre-settled status under the EU settlement scheme (EUSS).

The IMA, which brought the case, successfully challenged the government’s registration regime, which requires people with pre-settled status to make a second application to the EUSS.

If they do not reapply for that status, which allows residence for five years, or permanent settled status, they face losing their rights to live in the UK under the Brexit withdrawal agreement.

But the High Court ruled in December that requirement was unlawful.

The news that the Home Office would change its rules was also received positively by diplomats in Brussels, who said it demonstrated that London was seeking to improve its relationship with bloc.

It comes as the UK and European Commission near a deal to improve the working of the Northern Ireland protocol — a running sore since the UK left the bloc in 2020.

The accord would smooth goods trade between Great Britain and Northern Ireland, and unblock British participation in programmes such as the Horizon research initiative, a €96bn fund for universities in more than 40 countries to collaborate on research projects.

One EU diplomat said: “We welcome the approach taken by the UK government and we wait for the full implementation of the judgment as soon as possible.

“This is a good step. It shows goodwill and removes an obstacle to better relations.”

IMA chief executive Kathryn Chamberlain said the decision affected more than 2mn people with pre-settled status, which is granted to those who have lived in the UK for no more than five years.

“We have already begun discussing with the Home Office how the IMA will be engaged as part of the Home Office’s work to make the necessary changes to the EUSS,” she said.

She encouraged citizens with pre-settled status to still apply for settled status as soon as they are eligible until new arrangements are in place.

Monique Hawkins, co-chief executive of the3million, a campaign group for EU citizens, said the court judgment “averted a ticking time bomb”.

The Home Office said: “After careful consideration, we have informed the court that we do not wish to pursue the appeal against the recent judgment relating to the EU settlement scheme. We are working to implement the judgment as swiftly as possible and will provide an update in due course.

“Those with pre-settled status are encouraged to apply for settled status as soon as they are eligible, so they can obtain secure evidence of their right of permanent residence in the UK.”

More than 5.5mn people have been granted pre-settled or settled status in the UK.

The commission did not immediately respond to a request for comment.

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