By Robin Emmott
BRUSSELS (Reuters) - European lawmakers on Thursday backed including investor arbitration in a trade deal with the United States, one of the biggest obstacles to a transatlantic accord, but a decision that activists called a capitulation to business.
A trade agreement between the United States and the European Union would be the world's largest, but Washington says any deal must include ways for investors to settle disputes, while some Europeans fear large U.S. companies would use arbitration to bully governments and challenge EU food and environmental laws.
Lawmakers on the European Parliament's trade committee voted 28 in favor and 13 against an EU-U.S accord that contains investment arbitration on Thursday. 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 center-right lawmaker, during the vote. A vote in the full parliament is due on June 10, and campaigners against a deal urged all lawmakers to reject it.
Lawmakers "should stand with European citizens, not with the corporate-led agenda of the transatlantic negotiations that are a threat to our societies and our environment," said Natacha Cingotti, a campaigner at Friends of the Earth Europe.
An EU-U.S. deal could add $100 billion a year to economic output on both sides of the Atlantic, the EU says.
An accord will not be ready before 2016. The European Parliament must establish its position, while the U.S. Congress needs to decide whether to grant President Barack Obama "fast-track" powers to negotiate trade deals.
Protest parties from across Europe's political spectrum have rallied against the U.S.-EU deal, known as the Transatlantic Trade and Investment Partnership.
Far-left parties oppose free trade. The far right are against the EU in general. 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. The European Commission, which handles trade policy for the EU's 28 countries, has frozen talks on arbitration with Washington within the trade deal.
French Green lawmaker Yannick Jadot said lawmakers ignored "a growing public outcry against enabling corporations to use extra-juridical tribunals to challenge state authorities."
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 EU is trying to avoid the precedent set by Australia, which rejected the investor-to-state dispute settlement (ISDS) 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.