An internal Brussels diplomatic document states that the EU will argue its court should be able to enforce the terms of a trade, fishing and security deal.

Downing Street sources rejected the proposal, saying the court was “by very definition not a neutral arbiter”.

Michel Barnier, the EU’s chief Brexit negotiator, said in Belfast yesterday that it would make unprecedented demands owing to European fears that Britain would deviate from “standards”.

“The UK cannot expect high-quality access to our single market if it insists on competing on state aid, social or environmental standards,” he said.

“The UK has chosen to become a third country, to leave the single market and the customs union, to leave behind the EU’s framework of common rules, common supervision and common Court of Justice,” he said.

“It has chosen to create two regulatory spaces. This makes frictionless trade impossible. It makes checks indispensable.”

Sir Iain Duncan Smith said yesterday that the proposal must be dismissed.

“We have simply got to say no,” he said. “Nobody in their right minds would accept this and if they continue to pursue this then we simply have to walk away.”

Downing Street noted that the court did not appear in other trade deals made by the EU.

“We have consistently been clear that we will not accept alignment as part of any free trade deal,” a source said.

“There is no reason for the EU to insist upon it. It doesn’t feature in their free trade deal with Canada, for example.”