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Formerly administered as part of the British Crown Colony of Mauritius, the British Indian Ocean Territory (BIOT) was established as an overseas territory of the UK in 1965. A number of the islands of the territory were later transferred to the Seychelles when it attained independence in 1976. Subsequently, BIOT has consisted only of the six main island groups comprising the Chagos Archipelago. Only Diego Garcia, the largest and most southerly of the islands, is inhabited. It contains a joint UK-US naval support facility and hosts one of four dedicated ground antennas that assist in the operation of the Global Positioning System (GPS) navigation system (the others are on Kwajalein (Marshall Islands), at Cape Canaveral, Florida (US), and on Ascension Island (Saint Helena, Ascension, and Tristan da Cunha)). The US Air Force also operates a telescope array on Diego Garcia as part of the Ground-Based Electro-Optical Deep Space Surveillance System (GEODSS) for tracking orbital debris, which can be a hazard to spacecraft and astronauts.

Between 1967 and 1973, former agricultural workers, earlier residents in the islands, were relocated primarily to Mauritius, but also to the Seychelles. Negotiations between 1971 and 1982 resulted in the establishment of a trust fund by the British Government as compensation for the displaced islanders, known as Chagossians. Beginning in 1998, the islanders pursued a series of lawsuits against the British Government seeking further compensation and the right to return to the territory. In 2006 and 2007, British court rulings invalidated the immigration policies contained in the 2004 BIOT Constitution Order that had excluded the islanders from the archipelago, but upheld the special military status of Diego Garcia. In 2008, the House of Lords, as the final court of appeal in the UK, ruled in favor of the British Government by overturning the lower court rulings and finding no right of return for the Chagossians. In March 2015, the Permanent Court of Arbitration unanimously held that the marine protected area (MPA) that the UK declared around the Chagos Archipelago in April 2010 was in violation of the UN Convention on the Law of the Sea.

In February 2019, the International Court of Justice ruled in an advisory opinion that Britain’s decolonization of Mauritius was not completed lawfully because of continued Chagossian claims. A non-binding May 2019 UN General Assembly vote demanded that Britain end its “colonial administration” of the Chagos Archipelago and that it be returned to Mauritius. UK officials defend Britain's sovereignty over the islands and argue that the issue is a bilateral dispute between Mauritius and the UK that does not warrant international intervention. 

Mauritius and Seychelles claim the Chagos Islands; negotiations between 1971 and 1982 resulted in the establishment of a trust fund by the British Government as compensation for the displaced islanders, known as Chagossians, who were evicted between 1967-73; in 2001, the former inhabitants of the archipelago were granted UK citizenship and the right of return; in 2006 and 2007, British court rulings invalidated the immigration policies contained in the 2004 BIOT Constitution Order that had excluded the islanders from the archipelago; in 2008 a House of Lords' decision overturned lower court rulings, once again denying the right of return to Chagossians; in addition, the UK created the world's largest marine protection area around the Chagos islands prohibiting the extraction of any natural resources therein