"In recent months we've been working really hard on a solution to this extremely complex and difficult situation and so reached an acceptable settlement for both parties," said Gerd Becht, Deutsche Bahn's legal affairs executive.

Lutz Bertling, head of Bombardier's transportation division, confirmed the two firms had come to an agreement, saying: "The settlement is a positive signal for our future cooperation."

Deutsche Bahn had been suing Bombardier for 350 million euros ($374 million) in damages, alleging "serious defects" with brakes and wheels after the collapse of earlier attempts by the two companies to reach an out-of-court settlement.

Deutsche Bahn was also suing Bombardier separately for an additional 160 million euros over issues with other trains.

Deutsche Bahn and Bombardier are heavily dependent on each other, with the former being the biggest customer for regional and long-distance trains in Europe while the latter is one of the few suppliers of high-speed trains.

($1=0.9358 euros)

(Reporting by Michelle Martin and Markus Wacket; Editing by Caroline Copley, Greg Mahlich)