A lawsuit against the Diana, Princess of Wales Memorial Fund by a US souvenir firm has been dropped after the two sides settled out of court.
The Franklin Mint produces mementos such as plates and dolls
Franklin Mint had sought £14m ($25m) in a malicious prosecution lawsuit.
A judge earlier said it could seek damages after the fund failed to stop Diana memorabilia being sold.
While the agreement will remain confidential, the fund hopes to release money to charitable causes associated with the princess.
The mementos sold by the US company include dolls and plates.
The Diana fund froze its charitable donations in July 2003 due to the costly legal battle.
Organisers of the fund said on Wednesday that they
will immediately resume awarding grants to good causes following the settlement.
The fund's chief executive Dr Andrew Purkis said the settlement meant "we can get back to committing all our energy and money to our humanitarian work".
He added: "Despite the difficulties of the last two years, we have been determined not
to let down our existing beneficiary projects, all of which survived."
The fund and Franklin Mint agreed that the "energy and resources" needed for a court battle would be better spent on a "mutually agreed international programme of humanitarian work" in honour of the princess.
According to the joint statement, the Mint withdrew its claim that the fund and its trustees acted with malice in initiating the legal action.
The statement said the Mint withdrew the claim "in recognition of the fact that the fund's trustees acted in good faith" and "on advice received from
their former American attorneys".
The statement added: "While the precise terms of the agreement are confidential, the goal is to release funds to excellent charitable causes which
resonate with the memory of the princess".
As part of the court settlement, the fund has pledged £14m towards grants over a five-year period, which have been jointly agreed with the Franklin Mint.
Neither the fund, the Mint, or the Mint's owners Stewart and Lynda Resnick made any money from the settlement, according to a joint statement issued on Wednesday.
The announcement came as a jury was about to be selected in Los Angeles Superior Court to hear evidence in the case.
The legal action was filed in November 2002 by the Pennsylvania-based firm.
It claimed the fund and the executors of the late Princess's estate, including her sister Lady Sarah McCorquodale, acted "maliciously, wantonly... and with the intent to oppress" the Mint.
The allegation related to an attempt the fund made in the courts in 1998 to
stop the firm producing souvenirs bearing the princess's
The fund's chief executive Dr Purkis had described the legal action as "unfounded".
The fund was left with a £4m legal bill from the original 1998 trial in which it tried, unsuccessfully, to stop Franklin Mint making memorabilia bearing Diana's image.
The fund's decision to freeze cash awards was previously described by the Charity Commission as a "massive blow" to voluntary organisations.
Causes including HIV/Aids treatment centres and landmine clearance projects, charities championed by Diana, had been under threat as a result.
Following the court settlement, the fund announced it would release £525,000 for a number of UK and international projects this year and begin offering new grants in 2005.
Immediate grants would go to work in the UK
supporting prisoners' families and young, unaccompanied refugees.
Money will also be offered to projects in Tanzania and Zimbabwe for palliative care.