AOL and Freeserve laywers in talks

However, lawyers for both sides are today in talks and an AOL spokeswoman says the company is hopeful of an "early resolution" of the dispute.

Freeserve claims support staff from AOL's subsidiary CompuServe, told people cancelling their CompuServe subscriptions to go with the free service not to do so because Freeserve would charge in the future.

According to a statement, Freeserve asked for an undertaking that CompuServe would not repeat these "untrue and defamatory statements". A Dixons spokeswoman claims the issue is unresolved, hence the current writ -- lodged in the High Court at the end of March.

An AOL statement says CompuServe had not received any evidence to support the complaint but conducted an investigation and undertook that its staff would not make any statements "which could be considered defamatory by Dixons Freeserve." An AOL spokeswoman added: "As far as we are concerned it is an old issue which was sorted out in January."

Lawyers for both companies are currently in discussion and are confident of an early resolution.

It is not the first time the two ISPs have locked horns. In January AOL disputed Freeserve's claims that it was the UK's number one ISP. AOL described Freeserve's figures of between 700,000 and 900,000 members as "disingenuous". AOL claims it has 550,000 members.

Despite the upsurge of free ISPs over the last few months, AOL says it has no plans to cancel its subscription charges.