Diana fund charities 'facing crisis'

The Franklin Mint has a range of Diana memorabilia

Charities supported by the Diana, Princess of Wales Memorial Fund say the decision to freeze its grants could have a devastating effect on their work.

It is being sued for more than $25m (£15m) by US-based company the Franklin Mint, which produces Diana merchandise including dolls, plates and jewellery.

The memorabilia firm claims the fund's unsuccessful attempt to sue it for making products bearing Diana's image was malicious.

Over the past five years the fund has made £50m of awards and many of its 120 beneficiaries are "unpopular causes" which say they will struggle to find alternative funding.

Contingency plans

Among them is the Refugees Arrival Project, which told BBC News Online that unaccompanied children - some as young as five - who arrive at the airport will be at "terrible risk" if its funding is cut.

The fund said it is legally obliged to stop payments while it is counter-sued by the Mint.

The fund, set up to help the causes Diana campaigned for, has now asked to borrow money from other charitable bodies, in an attempt to keep its projects going.

There is no finer memorial to Diana, Princess of Wales than the humanitarian work continuing in her name Dr Andrew Purkis, Memorial fund chief executive Charities fear for future

Its chief executive, Dr Andrew Purkis, told the BBC about £10m was needed to honour existing commitments.

It has warned beneficiaries about the crisis in the hope they can make contingency plans "to cope with such an unexpected and painful blow".

It is also trying to find a way to make sure that a freeze on new grant giving is only temporary.

Dr Purkis said: "If this doesn't work, it means that unfortunately and terribly wastefully, a lot of wonderful projects may have to close while the fund remains in a frozen state."

"We are simply not prepared to see this inspiring work destroyed."

'Catastrophic'

A spokesman for Diana's brother, Earl Spencer, said he was confident the fund would quickly resolve the problem.

The organisations supported by the memorial fund include bodies helping vulnerable young people, prisoners' families, refugees and asylum seekers in the UK.

It also helps charities trying to protect people from landmines and ease the suffering of the terminally ill in some of the world's poorest countries.

Lucy Gampell, director of Action for Prisoners' Families, said it would be "catastrophic" if its grant - a quarter of its total budget - was lost.

The Mint is claiming punitive and exemplary damages following the fund's legal action against it.

The Philadelphia-based firm has made no comment, and there was no hint of an out-of-court settlement on Friday.

'Principle'

The BBC's Nick Bryant in Philadelphia says the firm claims the suit is not about money, but legal and commercial principle.

The suit could also constitute a warning to other charitable trusts not to try to monopolise the cache of their namesakes.

Ironically, our correspondent says, the Franklin Mint says if they win they will donate the damages to charity.

The fund and Diana's estate had argued the Mint's production of a "limited edition commemorative plate" soon after her death in 1997 violated their "exclusive rights" to her name and image.

The action was thrown out after being labelled "groundless and unreasonable", leaving the fund with a £4m legal bill.

The Mint claims the action was an attempt to damage its "sales efforts, embarrass it and sully its reputation".