Whitehall is reported as favouring a model under which the UK and EU would have an equal number of judges presiding over a tribunal with another, independent, judge given a casting vote.

A similar system is used by South America’s Mercosur trade bloc.

The news comes after the European Council stated that the ECJ must remain a competent court in the two-year transition period from 2019.

However, this has incensed Brexiteers who said such a move would delay Brexit unit 2021.

One model envisages voluntary referrals being made to the ECJ for decisions on disputes over trade rules that are “identical in substance to corresponding EU rules”. However, the referral could only be made with the UK and EU’s agreement.

A new court is also planned to oversee a free trade agreement between the UK and EU, based on the European Free Trade Association’s (EFTA) court.

A government source told The Sunday Telegraph that the new court would be the “most likely” solution to a problem that would otherwise occur in phase two of negotiations.

“We’re attempting to ensure a comprehensive, tariff-free free trade agreement, and we understand it is impractical to not give some thought to judicial mechanisms to police that,” the source said.

“Once we’ve moved to what David Davis calls Canada-plus plus plus, we are going to have a bespoke and unique mechanism for dispute resolution and that may well be to take the best of international experience. It may well be a new court system.”