The EU on Wednesday proposed a special court to resolve disputes arising from a huge trade deal with the United States, instead of the widely criticised tribunals Washington wants.

Many EU member states and the European Parliament fear the US-backed system allows big companies to force governments to change laws, effectively undermining democratic oversight of public policy.

EU Trade Commissioner Cecilia Malmstroem said there was huge public distrust on an issue which has dogged progress in negotiations on the massive Transatlantic Trade and Investment Partnership (TTIP) accord.

"There is a fundamental lack of public trust in the old model," Sweden's Malmstroem told a press conference in Brussels.

"What we are we are proposing for the TTIP is a court-like system (which) ... would be subject to democratic principles and public scrutiny."

Malmstroem first outlined the proposals in May as opposition grew to TTIP but they were not enough for suspicious MEPs who in July condemned the Investor-State Dispute Settlement system which are routinely included in free trade pacts.

The EU carried out a major survey last year which found widespread public scepticism about TTIP, and ISDS in particular, with the strongest opposition in key state Germany.

ISDS is supposed to protect investors who fear that local laws such as health and safety regulations can violate a trade deal and threaten their investments.

Opponents instead say it allows commercial interests to force governments to change laws at the behest of private interests.

- 'Public justice, not private' -

Malmstroem insisted the proposed new system was designed expressly to avoid this.

"The right to regulate will be fully protected, in black and white," she said.

"What we are setting out here is a public justice system; it is not private justice."

Under the proposals there will be a central tribunal of 15 judges -- five from the EU, five from the United States and five others from third countries.

They would hear only TTIP cases and unlike the ISDS system in which the parties select the panel, they would constitute a permanent bench.

Malmstroem's proposals got a mixed response, reflecting the sharp differences over ISDS and the wider TTIP negotiations.

Corporate lobby BUSINESSEUROPE said it preferred the simpler ISDS system and warned that the Commission's plan could prove too complicated for most companies.

"We understand that the intention ... is to make the system more transparent ... but we have to be careful as introducing too many conditions can limit the scope of protection and make the system unworkable in practice," it said in a statement.

Environmental group Greenpeace attacked the plan as a "two-speed justice system -- privileged justice for multinational corporations to protect their private interests, and a basic justice for citizens and small- and medium- enterprises."

"Greenpeace calls on the Commission to permanently end negotiations on any form of ISDS," it added.

The US and the 28-nation EU began talks on what would be the world's biggest free trade deal in 2013 with hopes for a quick agreement.

Hopes to conclude this year now seem in doubt, with Malmstroem's announcement only a first step in potentially lengthy consultations with member states and the European Parliament.

Asked when a final proposal might be submitted to the US side, a Commission source said: "It is too early to say whether it will be for the October round or for the next round."