Impact Scotland secured planning permission last year for the 1,000 capacity venue to be built behind the RBS building at St Andrew Square.

A flagship cultural project of the City Region Deal, the £45 million Dundas Centre had been earmarked to become the new home of the Scottish Chamber Orchestra. Sir Robert McAlpine won the contract to build the David Chipperfield-designed facility in August.

However, a judicial review against the project was brought by Nuveen Real Estate, the developer of the nearby St James Centre, which raised concerns that the City of Edinburgh Council’s planning approval had breached rules to protect the World Heritage Site and a strict skyline policy for the city centre.

Fearing a potential protracted legal battle, Impact Scotland paused work on the venue last month to seek out alternative locations.

Now a process of mediation, initiated by the council and led by Stephen O’Rourke QC, has resulted in an agreed way forward between the two parties.

Under the agreement, Impact Scotland will redesign the concert hall, submit a fresh planning application and work in partnership with Edinburgh St James to ensure the successful delivery and then operation of the new concert hall within the context of the wider regeneration of the area.

The council and Edinburgh St James will also jointly seek the permission of the Court of Session for the appropriate disposal of the current Judicial Review proceedings.

Sir Ewan Brown, chair of IMPACT Scotland, said: “Our ambition is to create a world-class concert hall for Edinburgh and Scotland. To deliver this timeously we have made significant changes to the concert hall plans in order to reflect the sensitivities of the site and the needs of our neighbours.

“We are hugely encouraged by the positive discussions we have had with Edinburgh St James and the City of Edinburgh Council and look forward to continuing to work with them to deliver a world-class concert hall.”

Martin Perry, director of Nuveen Real Estate, said: “We welcome the initiative to substantially reduce the size of the concert hall and we are happy to work with Impact Scotland and the City of Edinburgh Council as Impact Scotland develops a new design which addresses our principal concerns. We hope the new design will better accord with the aspirations for this quarter of the city.”

Adam McVey, the leader of the City of Edinburgh Council, added: “I am delighted that agreement has been reached between the parties to get the concert hall back on track. This is an important new venue for our city and in one of the most sustainable locations, with fantastic public transport connections.

“We will now work with IMPACT Scotland and Edinburgh St James to continue the delivery of the regeneration of the east end of the city centre.”