The issue is now referred back to the Court of Session for further action.
"The British people gave a clear instruction to leave, and we are delivering on that instruction", a spokesman said, according to Bloomberg.
The MPs are widely expected to reject her proposal, reports said.
Sterling skidded to its weakest level since April 2017, falling to $1.2527. "So the government will step up its work in preparation for that potential outcome", she told parliament.
The ruling comes on the eve of MPs' vote on Theresa May's Brexit deal, which is due to take place tomorrow (December 11) following five days of debates. "My message was clear. Disappointed it has taken so long for Prime Minister to listen". Meanwhile, British Prime Minister Theresa may told of two scenarios if the country's Parliament sabotaging the agreement on Brexit.
"When a member state has notified the European Council of its intention to withdraw from the European Union, as the United Kingdom has done, the Member States is free to revoke unilaterally that notification", the Luxembourg court said.
The Court of Justice said in an emergency judgment that London could revoke its Article 50 formal divorce notice with no penalty.
That could provide May with a window of opportunity to go back to Brussels and push for revised terms of departure from the bloc.
The Court itself said it had ruled with unprecedented haste to show British lawmakers they have three options not two - leave on agreed terms, leave without a deal or not leave at all.
A ruling from European judges is what the group has sought from day one.
"Revocation. would have the effect that the United Kingdom remains in the European Union under terms that are unchanged", it said.
They sought a declarator from the Courts on whether, when and how the notification made by the Prime Minister under Article 50, which will lead to the UK's withdrawal from the European Union on 29 March 2019, can be unilaterally revoked. On that basis, it could make sense to vote for May's deal - which they dislike because it retains closer ties to the bloc than they want - rather than risk no Brexit at all. Both Brussels and London say there is no scope to renegotiate.
May's deal is scheduled to be put before the Commons on Tuesday, and was already expected to face a heavy defeat with little support from either hard Brexiteers or Remain-supporting MPs within the Conservative party, and the PM has found almost zero support from across the aisle.
May has been trying to win over Conservative Party members to support her plan, but some aren't budging.
The speaker of the lower house of parliament, John Bercow, called for lawmakers to be given a vote on the decision to defer the vote on the deal itself. People campaigning against the Brexit move welcomed the Monday ruling as hopeful.
Just a handful of MPs publicly supported her deal on Monday.
He said: "It's irrelevant because just imagine how the 52 percent of the country who voted for Brexit would feel if any British government were to delay leaving the European Union on March 29".
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