Cannot select services while configuring docker compose as remote interpreter

When I try to use docker-compose as remote interpreter in PHPStorm or PyCharm I cannot select a service to run. After selecting the compose file I get top level elements 'services' and 'network' in the services list instead of the services.

It used to work until recently. Might be related to an update of PHPStorm or Docker Desktop.

I'm using: MacOS Big Sur 11.5.1, PHPStorm 2021.2, Docker Desktop 3.5.2

My docker-compose.yml:

version: "3.7"
services:
  sam-dashboard-service:
    build:
      context: ./docker
    container_name: ${SAM_CONTAINER:-sam-dashboard}
    ports:
      - "${SAM_PORT:-127.0.0.1:80}:80"
    volumes:
      - ./sam-dashboard:/var/www/sam-dashboard
      - ./purchase:/var/www/purchase
      - ./studio:/var/www/studio
      - ./docker/ssh:/root/.ssh
networks:
  default:
    name: local

PHPStorm screenshot