At the High Court in London yesterday, Nicholas Stadlen QC, for the Bank, described the news as a "the most remarkable and humiliating climbdown in the history of England litigation" and declared triumphantly: "This is unconditional surrender."On Tuesday, Gordon Pollock QC, for the liquidators, accused Peter Cooke, a former head of banking supervision at the Bank who was testifying in court, of lying.As the central bank is legally protected from negligence claims, the liquidators pursued the stronger claim of misfeasance in public office, alleging the Bank deliberately turned a blind eye to fraud at BCCI (Bank of Credit and Commerce International, nicknamed by some the Bank of Cocaine and Criminals International), which collapsed in 1991 owing more than £10bn to creditors.The allegations centred on 22 Bank officials who the liquidators claimed knew BCCI was in a bad state long before its crash and failed to take steps to prevent what has been described as the largest banking collapse in modern history. The liquidators of the collapsed bank BCCI dropped their £850m damages case against the Bank of England yesterday, ending what is believed to be the most expensive legal battle in UK history. The Bank immediately described the decision as "unconditional surrender". After repeatedly failing to negotiate a settlement with the Bank, Deloitte, the BCCI liquidators, decided to abandon the lawsuit which had dragged on for 12 years and racked up legal bills of £120m.

Deloitte said: "If the case were to continue, it could last for several more years, allowing for appeals, and involve further enormous costs." The move came as a surprise to the Bank, which had vowed to fight to the end to defeat the allegations of dishonesty against its officials. Investors were also heartened by the company's announcement of a cost-cutting plan which could see it shed up to 32,000 jobs to combat shrinking revenues from its traditional fixed-line business in Germany.The job cuts will be offset by the hiring of 6,000 staff and the redeployment of a further 7,000, lowering the net loss of jobs to 19,000. The cutbacks will cost €3.3bn (£2.2bn) over three years but they will generate big cost savings. The company wants to reduce labour costs as a proportion of sales from 23.4 per cent last year to 20.9 per cent in 2007.About 110,000 staff, or 46 per cent of the Deutsche Telekom workforce, are employed in its fixed-line business, which recorded a 5.4 per cent fall in sales in the second quarter.In March of this year, Deutsche Telekom's chief executive Kai-Uwe Ricke said he wanted to reduce the headcount by 5 per cent a year, following other German icons such as DaimlerChrysler and Siemens which have also cut labour costs in Germany savagely by moving work to lower-cost countries.. Shares in O2, Britain's biggest mobile phone network, fell 6 per cent to 197.5p, taking them below the 200p agreed offer price announced on Monday by Telef?a. Analysts calculate that Deutsche Telekom, the owner of the UK's fourth-biggest network, T-Mobile, would probably have had to bid 230p to stand a chance of winning O2. But the regulatory hurdles to a successful bid would have been daunting as it would have given Deutsche Telekom more than 40 per cent of the UK mobile phone market.T-Mobile is losing customers in the UK, where its share of the market has shrunk to about 17 per cent compared with the 24 per cent O2 commands.In Germany, Deutsche Telekom shares rallied on relief that it has not been dragged into an expensive bid battle for O2. The mobile phone operator O2 was the biggest faller in the FTSE 100 index yesterday after Germany's Deutsche Telekom said it would not trump Telef?a's £17.7bn cash bid for the company.

There had been intense speculation that Telef?a's move would prompt a counter bid from the Germans. But in a statement to the Stock Exchange, Deutsche Telekom said it would not be making a counter offer for O2 because "this would not be in the interests of DT's shareholders". Mr Morgan was cleared of any wrongdoing by an internal investigation.The case continues.. mentioned."Mr Cruddace said that in each case it had always been his intention to hold on to the stock for some time. He said his Booker investment was not sold for "certainly more than six months and possibly more than one year". And he said that he could have retained his SkyePharma interest for two years.Mr Hipwellis accused of deliberately manipulating the market.