Blue Mountains Council has dropped legal action it took to stop suspension by the local government minister.
In Feburary, the minister, Gabrielle Upton, issued a notice to suspend after concerns were raised about the relationship between the man who conducted the asbestos inquiry for council, Michael Tooma, and a former employee.
Council sought an injunction to stop any suspension going ahead, winning an interim order in the Supreme Court which was overturned by the Court of Appeal.
The case returned last month to the Land and Environment Court, where the matter was to be resolved, but council has now discontinued any action.
A council spokeswoman said: “That decision was taken by the council after the minister announced the public inquiry into the council as the minister confirmed in her announcement that the councillors would remain in office while the inquiry was conducted.”
The decision was welcomed by the minister.
“Unnecessary, expensive and protracted legal action will do nothing to improve the council’s poor track record of asbestos management,” Ms Upton said.
“I note the council has also agreed to pay the government’s costs in relation to the Land and Environment Court proceedings.”
Ms Upton said the public inquiry, to be conducted by Richard Beasley, SC, would provide “an independent, open and transparent process to determine the facts and help address the serious issues impacting on the council”.
The February notice to suspend was the second issued by the minister, after she acted last December in the wake of the asbestos revelations. She later issued a performance improvement order instead.
That order “holds the council to account and ensures it takes the necessary action to protect its workers and community”, she said.