Mr al-Fayed has also agreed to pay court costs, estimated to run to £2m.

Under the settlement, announced on Thursday, Mr al-Fayed and three co-defendants agreed to pay Mrs Rowland damages.

The payment relates to the inducement of breach of the contract, under which Mr Rowland hired a strong box in Harrods' basement vaults.

The settlement ends the last bitter battle between the tycoons

They also agreed to pay the value of items said to be missing from the box - emeralds, rubies, rare Tibetan coins, a Tibetan stamp, a gold cigarette case, plus documents and audio tapes.

No figure has yet been put on the damages, although the missing items were initially said to be worth about £200,000.

It was a posthumous victory for the former Lonrho tycoon, who died aged 80 on 24 July this year.

And it is a vindication of his widow Josephine's decision to carry on with the High Court action he had launched against Mr al-Fayed and others he alleged were involved in the break-in.

Mrs Rowland said after the settlement: "I am very sad. I would have liked my precious mementos of Tiny back again."

Mr al-Fayed's counsel, Christopher Carr QC, had stressed that the defendants denied taking any valuables from the box and therefore were not in any position to return them.

'Liar and a fraud'

A spokesman for Mr al-Fayed said later: "We are pleased that 14 years of antagonism between the parties is now at an end."

The settlement was against Mr al-Fayed and three men involved in opening the deposit box on 6 December 1995 - his personal secretary Mark Griffiths, his director of security, former Met Police Det Chief Supt John Macnamara, and his chief bodyguard Paul Handley-Greaves.

By agreement, the case against safe deposits manager Colin Dalman and senior security manager John Allen was discontinued.

Undertakings were given that copies made of documents in the box would be destroyed.

Mrs Rowland's counsel, Christopher Moger QC, had alleged at the start of the hearing that the safety box was opened several times as part of Mr al-Fayed's long-running campaign to overturn a Department of Trade and Industry report on his takeover of Harrods in which he was exposed as a "liar and a fraud".

Tiny Rowland died in July this year

He said documents from the deposit box were used by Mr al-Fayed in attempts to persuade Mr Rowland - his old adversary in the battle for control of Harrods - to sign a statement admitting that he bribed the then junior DTI minister Michael Howard MP into appointing inspectors to carry out the Harrods inquiry.

Further attempts to persuade Mr Rowland to admit bribery involved offers from Mr al-Fayed of £10m and ownership of high-class shirtmakers Turnbull & Asser.

Mr Rowland refused them all. The House of Commons Standards and Privileges Committee subsequently rejected Mr al-Fayed's allegations against Mr Howard.

Mr Justice Bell heard that Mr al-Fayed admitted he knew about the break-ins and the copying and that he was shown some of the documents from the box, but he denied authorising them.

He blamed former security director Robert Loftus, who, after leaving Harrods, told Mr Rowland about the break-ins.