BiE said calls from some British Brexiter MPs to scrap the WA deal altogether (if the parties can not conclude a "future relationship" deal in coming weeks) had only "reinforced that message".
Amid the worsening atmosphere between London and Brussels, it emerged the European Union had even raised the prospect that it could block exports of animal products from the United Kingdom once the current Brexit transition period comes to a close at the end of the year.
The EU Commission has since called on the United Kingdom government to withdraw the Bill "in the shortest time possible and in any case by the end of the month", adding that by putting it forward in the first place "the United Kingdom has seriously damaged trust between the EU and the UK".
"I believe it is potentially a harmful act for this country, it would damage our reputation and I think it will make it harder to strike trade deals going forward", he told Channel 4 News.
But European lawmakers said on Friday they would not approve any new trade deal unless the withdrawal agreement was fully implemented, while there is also talk of possible legal action.
Prime Minister Boris Johnson's government said explicitly this week that it plans to break worldwide law by breaching parts of the withdrawal agreement treaty that it signed in January, when it formally left the bloc.
The UK side is understood to be ready to keep talking even if Brussels is suing the UK for breach of an global treaty, but continues to demand "realism" from European Union negotiators on issues like state aid and fisheries. We knew there was a debate over fishing and over state aid but then to explode the argument into breaking an global treaty has been condemned by so many people.
Writing to hundreds of government lawyers, Sir Jonathan said that the new head of the civil service Simon Case - appointed by Mr Johnson as his cabinet secretary this week - had issued a ruling that "notwithstanding the breach of worldwide law", ministers and officials would be operating within the terms of their codes of conduct when working on the bill.
The row over the Internal Market Bill, created to govern trade within the UK, has dramatically increased the chances of a "no deal" scenario under which EU-UK trade would from January 2021 be conducted on World Trade Organisation terms, involving hefty tariffs and quotas on a wide range of goods and services.
Earlier this week, at the end of the eighth round of talks between the negotiators from both sides, UK Brexit Chief Negotiator David Frost said the exchange was useful but that a number of challenging areas remain and the "divergences on some are still significant". "This interpretation can not have been the real intention of those who framed the protocol (it certainly wasn't ours) - and it is therefore vital that we close that option down", Johnson said.
Informal UK-EU talks are due to resume on Monday, with the next official round of talks the ninth since March starting in Brussels on September 28.
Mr Johnson's battening down of the hatches is likely to add further malcontent to the ongoing trade negotiations.
Speaking on Sky News, the former Tory leader said the UK's reputation had been "severely damaged by what was said on Tuesday and by the bill which is now before parliament".
"I don't think this will get through the Lords, in its present form", Lamont said.
Johnson said the EU's stance would "seriously endanger peace and stability in Northern Ireland".
He called for "overwhelming support" for the bill, describing it as "absolutely vital" to "prevent a foreign or global body from having the power to break up our country".
US House Speaker Nancy Pelosi has also said there would be "absolutely no chance" of a trade deal between the United States and the UK if global obligations as they apply to the peace process in Northern Ireland are violated.