Solon was deported in July 2001 after it was presumed she was an illegal immigrant, following a car accident in northern New South Wales in which she was seriously injured. The mother of two was not located until May last year, at a hospice in the Philippines run by Catholic nuns.

Immigration Minister Amanda Vanstone apologised to Solon on behalf of the Government, saying she hoped the “significant” amount of compensation would allow Solon to move on with her life. As part of the agreement, details of the settlement are to be kept confidential, however The Age believed the deal was worth $4.5 million and that Solon’s lawyers had initially sought a figure close to $10 million.

“On behalf of the Government I apologised to Solon and her family when her case first became known, and the Secretary of my department, Mr Metcalfe, apologised on behalf of the Department of Immigration and Multicultural Affairs,” Senator Vanstone said in a statement.

The arbitration process was presided over by former High Court judge Sir Anthony Mason AC KBE.

Both parties expressed satisfaction with the speed at which the resolution was reached. “I am happy that the decision to proceed through arbitration, avoiding potentially lengthy court processes, has helped achieve an appropriate settlement as quickly as possible,” Vanstone said.

Solon’s lawyer, George Newhouse said the negotiations took as long as he had expected, but that his client was not commenting until the matter was completely resolved. “There are some outstanding issues we need to resolve with the Commonwealth that are quite substantial issues,” he said.

Newhouse said he expects to finalise these points in about a month. As for his client, Newhouse said: “Her health has stabilised and is slowly improving but obviously she will never be 100 per cent”.

Solon lives with her sister under 24-hour care in Sydney, and has been diagnosed with tetraparesis, which has left her partially paralysed.

Solon’s case was one of several high profile mistakes examined by the 2005 Palmer inquiry into the Department of Immigration and Multicultural and Indigenous Affairs.

The inquiry was sparked by the wrongful detention of Cornelia Rau, a German-born Australian resident who was held in immigration detention for 10 months after absconding from a psychiatric hospital and being mistaken for an illegal immigrant.

Vanstone said the Government would be happy to enter arbitration in Rau’s case, however, she said she had not received a statement of claim from Rau’s lawyers.

“Rau’s lawyers have failed to respond to the Commonwealth’s repeated invitations to meet to progress any possible claim by Ms Rau,” said a spokesperson. from the Department of Immigration and Multicultural and Indigenous Affairs.