European lawmakers have supported including investor arbitration in a free-trade deal with the United States, a breakthrough on one of the biggest obstacles to a transatlantic accord.

A trade agreement between the US and the EU would be the world's largest, but Washington says any deal must include ways for investors to settle disputes.

However some Europeans fear large US companies would use arbitration to bully governments and challenge EU food and environmental laws.

Lawmakers on the European Parliament's trade committee today voted 28 in favour and 13 against an EU-US accord that contains investment arbitration. The committee is seeking the full assembly's support for the trade pact.

"We need a new and reformed protection for investors, "tweeted Daniel Caspary, a German centre-right lawmaker, during the vote. A vote in the full parliament is due on 10 June.

An EU-US deal alone could add $100bn a year to economic output on both sides of the Atlantic, the EU says.

While an accord will not be ready before 2016, the European Parliament must establish its position, while the US Congress must decide whether to grant President Barack Obama "fast-track" powers to negotiate trade deals.

That has become a challenge after protest parties from across Europe's political spectrum, who did well in European elections a year ago, have rallied against the US-EU deal, known as the Transatlantic Trade and Investment Partnership.

Far-left parties oppose free trade, the far right are broadly against the European Union and the Greens worry about the impact of free trade on the environment and food safety.

The issue of investment arbitration is one of the most contentious issues of a deal and the European Commission, which handles trade policy for the EU's 28 countries, has frozen talks on arbitration with Washington within the trade deal.

The Commission hopes to reform the way investors bring cases in trade treaties by including an appeal mechanism and possibly setting up a permanent court with independent judges.

The European Union is trying to avoid the precedent set by Australia, which rejected the investor-to-state dispute settlement mechanism in a trade deal with the United States that came into force in 2005, arguing that its legal system was robust enough to resolve problems.

The United States says EU countries and their respective legal systems mean a single ISDS mechanism is crucial in any accord to protect companies' investments.