Watermans are a step closer to having their funding reinstated after the Arts Council offered to look again at cash cuts.
Watermans has lodged an application with the High Court based on the "unfair and irrational approach" that the Arts Council took in deciding to cut their funding last year.
And a judge has backed their claims, ordering the case back to court because Watermans "...was told (by the Arts Council) of the rationale for the proposed decision (to withdraw funding) so it could comment on it, and arguably having answered this, found that the final decision had been taken on different grounds which it had no proper opportunity to address."
The Arts Council has now asked Watermans to withdraw its legal action in return for a new funding recommendation being taken to the Arts Council's next London Regional Council Meeting.
Karam Bhullar, Chair of Watermans, said: "We welcome this approach which will allow us to focus our time and resources on our arts programme.
"At a time when Watermans is planning to play a significant role in the launch of the 2012 Cultural Olympiad, we would not want these proceedings to cast a shadow over the programme for West London.
"Given the judges positive comments about our case, we hope that the Arts Council will now reinstate Watermans' funding without further delay."
Watermans is the second organisation to apply for judicial review of an Arts Council funding decision, following the application by the Union Dance Company last week.
An Arts Council spokesman said: "While we note the judge's comments, Arts Council England in no way concedes that the decision not to renew Watermans' funding was wrong, or that the way in which that decision was taken was unfair or unlawful.
"As always, we are mindful of the need to protect public money. We have therefore made an offer to Watermans' legal representatives to put the funding proposal before our Regional Council again at the meeting in September, in order to avoid the expense and delay of a hearing.
"No decision has been taken regarding future funding."
