The Premiership champions averted the possibility of a three-point penalty after Tottenham had threatened to report their London rivals for an illegal approach unless they received a suitable offer by midday Friday.

After talks into the early hours of Saturday morning Tottenham finally confirmed they had reached agreement "in principle" with Chelsea.

The two clubs said in a joint statement: "Tottenham Hotspur Football Club and Chelsea Football Club have announced that they have reached agreement in principle regarding Frank Arnesen.

"Formal documentation is to be signed by June 30, 2005. The terms are confidential and will not be disclosed."

The row erupted after the publication of photographs showing Arnesen relaxing on the yacht belonging to Chelsea's billionaire owner Roman Abramovich.