An arbitration panel has ruled that a "cross-default" provision in the agreement between Silverstein Properties and the Port Authority of New York and New Jersey is now terminated. That provision would have declared Silverstein Properties to be default on three large, unbuilt office towers at Ground Zero if it did not meet construction deadlines for any one building.

The panel also denied a request by the authority that Silverstein Properties "commence or resume work on the three towers," stating that granting that request would be "unwise and counterproductive to the needs of the project" as "all parties seem to recognize that there may be a need to alter the plans for those towers."

At the same time, the panel denied Silverstein Properties' request that the authority be held in "material breach" of its contract and it also denied its request for a rent abatement "at this time..., without prejudice to a later claim when the relevant circumstances can be established with sufficient certainty."

The panel, which issued its ruling yesterday, gave both sides in the dispute 45 days to reach a new agreement, after which time it would dictate a new development plan.

Mr. Silverstein leased the trade center complex six weeks before it was destroyed in the 2001 terrorist attack, but has been at odds with the Port Authority over the pace of development and financing for the office towers and has been unable to obtain corporate tenants or construction loans for the building. Last year, he said that the authority should finance at least two of the three towers.

After long controversies over the design of the redevelopment of the former World Trade Center site that was demolished in the terrorist attacks of September 11, 2001, the authority and Silverstein Properties, which is headed by Larry Silverstein, reached an agreement on a plan before the start of the current financial crisis.

Mr. Silverstein took his disputes with the authority to arbitration in August claiming that the Port Authority's delays in completing the infrastructure at Ground Zero had undermined his ability to attract tenants and get the financing. In addition to seeking rent abatement, his company was also seeking damages of "at least $2.75 billion."

Mr. Silverstein issued a statement today that said that the panel's action is "a welcome development for New Yorkers - especially those living and working downtown - who have waited long enough for the neighborhood to be completely restored," adding that he is "ready to work with the Port Authority 24/7 to hammer out a deal that assures that the World Trade Center is fully rebuilt as quickly as possible."

The authority's statement today said it "is grateful to the panel for issuing a responsible decision that protects public resources while creating a positive environment in which the visible, daily progress on the site can continue moving forward." The authority is now building One World Trade Center that had formerly been called the Freedom Tower. It is planned to be the tallest building on the site.

Mayor Michael Bloomberg issued a statement today that said that "This is a critical moment to move forward with the long-term development of the site. The parties cannot let it pass without progress."

The three members of the arbitration panel are Eugene McGovern, Harry P. Sacks and George C. Pratt.