Rosianne Cutajar has dropped a defamation suit against author and blogger Mark Camilleri, days before she was due to testify.
In a Facebook post on Friday, she said her priorities had changed and the legal battle was not "useful and important" anymore.
Camilleri responded by claiming he would not accept the withdrawal and would work to see her charged in court.
The former parliamentary secretary and former Labour MP sued Camilleri in 2021 over claims he made about her in his book and in a Facebook post.
"Friends, life's priorities change over time for everyone. As you know I recently asked to return to the PL parliamentary group," she wrote to Facebook.
"Respecting this process, and considering that my life's circumstances and priorities have totally changed, I feel it is not useful and important to pursue legal proceedings I opened three years ago."
Members of the PL parliamentary group met on Thursday to discuss possible Cutajar's return to the party, after Prime Minister Robert Abela revealed last month that she had requested to be "reintegrated" within the group.
On Friday Cutajar said she dropped the case out of respect for her family and her daughter, who are the most precious people in her life, and that no monetary compensation can make up for the "cruel and insensitive actions" she was subjected to.
The independent MP was due to testify earlier this week but at the last minute her lawyers presented a medical certificate saying she was unwell. Magistrate Montebello put off the case to Monday.
Camilleri refuses to accept Cutajar's withdrawal
In his book - A Rent Seekers' Paradise - Camilleri had spoken of a close personal relationship between Cutajar and Yorgen Fenech after he was identified as the owner of secret company 17 Black. He was later accused of complicity in the murder of journalist Daphne Caruana Galizia.
Cutajar sued Camilleri over a Facebook post in which he said the MP had obtained money from Fenech to defend him against the accusations he was facing and to attack Caruana Galizia's investigative work.
In a reaction to Cutajar's announcement on Friday, Camilleri refused to accept her withdrawal of legal proceedings.
He said the court cases Cutajar opened against him over his "truthful" writings were bullying tactics that cost him a lot of money to repeatedly travel to Malta for legal hearings. He does not currently reside in Malta.
Mark Camilleri's response."Those actions are unacceptable and I will not allow people in power to bully me like this," he wrote on Facebook on Friday afternoon.
"This is why I do not accept her libel case withdrawal. Instead, I will be dedicating my time and energy with my impeccable lawyers to prepare the necessary legal paperwork for the police to take Rosianne Cutajar to court with criminal charges."
Cutajar and Camilleri have been at each other's throats for years.
Cutajar resigned from Labour's parliamentary group in the aftermath of the publication of more than 2,000 WhatsApp messages from 2019 between Cutajar and Fenech.
The chats showed the intimate relationship between Cutajar and Fenech at a time when she was defending him at the Council of Europe.
In one conversation, Cutajar told Fenech she would seek a consultancy with the Institute for Tourism Studies to "pocket another wage", adding, that "everybody pigs out".
An investigation by the national auditor later concluded that her consultancy with ITS was "fraudulent", "irregular" and "in breach of all policies and procedures".