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The settlement comes just a week after the company was savaged by the US Committee on Foreign Affairs which slammed the company as

"spineless and irresponsible" before forcing it to apologise to the mother of Shi Tao, who was watching the hearing from the gallery.

The families of Shi Tao and Wang Xiaoning sued Yahoo

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last April, accusing it of aiding in their arrest and subsequent torture of the dissidents.

"After meeting with the families, it was clear to me what we had to do to make this right for them, for Yahoo, and for the future," says Yahoo Chief Executive Jerry Yang.

"Yahoo was founded on the idea that the free exchange of information can fundamentally change how people lead their lives, conduct their business, and interact with their governments. We are committed to making sure our actions match our values around the world."

The World Organization for Human Rights USA, which brought the case, saw things slightly differently, arguing that Yahoo was simply "bowing to intense pressure from Congress and significant legal challenges in court."

The details of the settlement have not been released and Yahoo has not admitted fault, however, it apologised to the families after the congressional hearing and has announced it's now "working to create a separate humanitarian relief fund to provide support to other political dissidents and their families."