Tesco's licensing application for a new store in Douglas will be looked at again by an appeal court, after a legal bid by Shoprite's owner.
Isle of Man Enterprises asked Deemster Caine to quash the Licensing Court of Appeal's decision ruling out hearing new evidence after the company objected to Tesco's original application.
Now the two sides have agreed to drop the legal battle after two new members joined the LCA and the Strand Centre was bought by a new owner.
Tesco and Isle of Man Enterprises will now go back to the court which will consider the case again.
Tesco was granted a licence in 2015 for the Express store it plans for the former MEA showroom in the Strand Centre.
Soon afterwards, however, Shoprite's parent company said it had new evidence and asked the LCA to consider it - but its application was turned down.
That sparked a court fight which has now been settled after the court heard the Strand Centre changed hands last year and is now owned by Sports Direct.
Both sides have agreed to drop their legal battle while the LCA reconsiders its decision.
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