The U.K.'s High Court ruled Thursday that Article 50, the trigger for the country's exit from the European Union, cannot be executed without a Parliamentary vote.
The verdict is the biggest blow to date for the government's Brexit plans and essentially indicates that the Prime Minister does not have the power to trigger the exit clause without the consent of lawmakers. The government said it was "disappointed" by the ruling and will appeal to the country's Supreme Court.
"The country voted to leave the European Union in a referendum approved by Act of Parliament. And the Government is determined to respect the result of the referendum. We will appeal this judgement," a government spokesperson said in a statement.
The appeal to the U.K.'s Supreme Court, will likely be heard by a full bench of 11 judges on Dec. 7.
Prime Minister Theresa May said after the ruling that the government intends to stick to the deadline of triggering the exit clause by the end of March 2017. "We believe the legal timetable leaves time for that," a spokeswoman for the Prime Minister said in a statement.
"The British people made the decision and the job of government is to get on with delivering the decision of the British people. This is a matter for the government. We have no intention of letting this derail our timetable," she added.
The pound surged 1.14% to $1.2445, the highest since Oct. 7 and its biggest single-day gain since August.
The closely watched case was brought by a group of British citizens, led by fund manager Gina Miller, which argued that a unilateral decision by May to trigger the Article 50 exit clause of the Lisbon Treaty would effectively override a 1972 statute that enshrines European law in the U.K.
The case also claimed that May would be stripping U.K. citizens of the rights conferred on them when they joined the bloc.
Britons voted 52% to 48% to leave the European Union on June 23, following a contentious and divisive referendum that included the murder of lawmaker Jo Cox, who was killed following a local constituency meeting just days before the vote.
Crucially for the Court, however, is the fact that the referendum decision was legally non-binding.
However, the government argued that the Prime Minister can trigger the article due to so-called "Royal prerogative," in which executive authority is given to ministers so they can govern on behalf of the monarch.
The Court said that view was "contrary to both to the language used by Parliament in the 1972 Act and to the fundamental constitutional principles of the sovereignty of Parliament and the absence of any entitlement on the part of the Crown to change domestic law by the exercise of its prerogative power."
"We decide that the Government does not have power under the Crown's prerogative to give notice pursuant to Article 50 for the U.K. to withdraw from the European Union," the three Justices assigned to the case wrote in their formal ruling.
The verdict comes just hours before the Bank of England is set to announce its November rate decision and release its quarterly inflation report -- a day known as the Bank's "Super Thursday" -- although most analysts expect it will make no changes to its key policy rates.