The ruling could pave the way to a turnaround

ABB shares jumped 9% in early trade before easing back slightly, lifted by news that the court had approved the company's settlement proposal in a long-running asbestos lawsuit.

Under the plan, ABB would pay $1.3bn (�700m) to compensate former employees suffering from asbestos-related illnesses, and would win protection from further litigation.

The ruling could face an appeal, and still requires the backing of a US district court, but analysts are hopeful that a final deal will be in place by the end of the month.

Breakthrough

"An important hurdle has been overcome. It is certainly a relief for investors," said Mark Diethelm, at Switzerland's Zuercher Kantonalbank.

The agreement would clear the way for a disposal plan aimed at raising cash to reduce ABB's crippling debt burden.

ABB has put its oil, gas and petrochemicals unit up for sale, with a price tag of about $1bn, but the risk of further asbestos litigation has deterred potential buyers.

The company, once seen as a potential European rival to General Electric, fell out of favour with investors after a 1990s acquisition spree built up its debts and left it lacking in focus.

ABB is mid-way through an ambitious restructuring programme aimed at halving it in size, but the cost of the overhaul contributed to an $800m loss last year.

Litigation pressure

Concerns over asbestos liabilities also darkened the outlook for the firm, forcing its share price sharply lower over the past year.

The firm was exposed to asbestos litigation through a former US subsidiary, Combustion Engineering, which used to make industrial boilers insulated with asbestos.