Nokia will pay out the sum plus interest to the state of North Rhine-Westphalia after announcing earlier this year it was closing down its last plant in Germany in Bochum, a town in the Ruhr Valley manufacturing region that has fallen on hard times.

The dispute has cost the mobile phone giant tens of millions already, officials said on Saturday.

According to the economic weekly WirtschaftsWoche, the German research ministry had given Nokia four million euros in grants to finance its factory in Bochum, which is in the heart of the industrial Ruhr region

The fruit of Nokia's research should have been exploited by Germany, but will not be after the Finnish phone maker closed Bochum, according to the ministry.

Technology foundation

To try to settle the dispute, Nokia had already started a 20-million-euro "Growth for Bochum" foundation providing capital for entrepreneurs in the mobile telephone and information technology sectors. The state government is also contributing to that foundation.

Nokia announced in January it would shift production from Bochum to Romania as it tries to bring down its labor costs.

The firm's decision sparked massive protests in Germany, where 2,300 jobs were expected to be lost and local sub-contractors were also expected to be hit in a region already reeling from the closure of much of its heavy industry.