Bundled Copilot CLI repeatedly opens a GitHub sign-in popup when CLI access is disabled by organization policy

I use GitHub Copilot Business in VS Code. My Copilot Business seat is active, but Copilot CLI is disabled by my organization’s policy.

Every time I start VS Code, the bundled Copilot CLI opens a separate GitHub sign-in popup. I can complete the GitHub sign-in successfully, but the popup appears again after restarting VS Code.

Normal Copilot authentication and chat requests work correctly. The problem appears limited to the bundled Copilot CLI component, which starts even when its related settings are disabled.

Environment:
> VS Code: 1.136.1
> GitHub Copilot Chat: 0.64.1
> OS: Windows
> Copilot plan: Copilot Business
> Copilot CLI: Disabled by organization policy

Settings tested:
> "github.copilot.chat.backgroundAgent.enabled": false,
> "github.copilot.chat.cli.mcp.enabled": false

Relevant logs:
> Logged in as ahmad-atmahadli
> Got Copilot token for ahmad-atmahadli
> copilot token sku: copilot_for_business_seat_quota
>
> [CopilotCLI] MCP server started
> [CopilotCLISession] Failed to fetch models:
> Error: 403 "unauthorized: not authorized to use this Copilot feature"

Steps to reproduce:
1. Use a Copilot Business account where Copilot CLI is disabled by organization policy.
2. Start VS Code.
3. Complete the separate Copilot CLI GitHub sign-in popup.
4. Close all VS Code windows.
5. Start VS Code again.
6. Observe that the sign-in popup appears again.

Expected behavior:

When Copilot CLI is disabled by organization policy, VS Code should not start the Copilot CLI service or request separate CLI authentication. Disabling the background-agent and CLI MCP settings should also prevent related initialization.

Actual behavior:

The bundled Copilot CLI starts an MCP server, attempts to fetch models, receives a `403`, and repeatedly displays a GitHub sign-in popup after VS Code restarts. Normal Copilot Chat continues to work.