James Murdoch, the chairman of News International, has reportedly agreed to cough up about £3-million ($4.7-million) in damages to the family of Milly Dowler, the 13-year-old English murder victim whose phone and voicemails were hacked by reporters of the now-defunct News of the World tabloid.

According to the Daily Telegraph newspaper, the Dowlers will get £2-million directly, with another £1-million going to a charity in Milly’s memory. The Dowlers apparently rejected an earlier offer of £1-million to the family and £1-million to charity.

The Telegraph noted that it will be the largest payout to any phone hacking victim yet.

Two months ago, Rupert Murdoch, the chairman of News International’s parent company News Corp., personally met with the Dowler family to apologize in person.

Since the phone hacking scandal erupted, not only was the News of the World tabloid shut down after more than 160 years; but its chief executive Rebekah Brooks resigned and later arrested by police. James and Rupert Murdoch even had to face a parliamentary committee to answer questions related to the hacking scandal.

Neither the Dowler family nor their attorney have officially commented on the settlement.

But the payment to the Dowlers may only be the beginning of News International’s expected largesse to phone hacking victims.

Relatives of the victims of the July 2005 London bombings may also seek compensation from the company after it was learned their phones were also hacked. They reportedly will also ask for seven-figure payouts.

Up until now, only celebrities, including actress Sienna Miller, have received big settlements from the publisher due to phone hacking.

The final payout could be enormous.

Police have unearthed a notebook containing 3,000 phone numbers from the office of Glenn Mulcaire, a private investigator who allegedly illegally accessed voicemails on behalf of the News of the World.

However, some media outlets are concerned by this latest development -- namely the investigation of reporters by police.

The Guardian newspaper, which has been approached by police to reveal its sources on stories related to the Dowler murder, said it will resist the unprecedented legal attack on journalists' sources by the Metropolitan Police of London.

It is a matter for the police to decide how best to carry out any investigation” said a spokesman for Dominic Grieve, the Attorney General for England and Wales,

If the police provide evidence that would support a charge under section five of the Official Secrets Act the attorney general's consent would be required. If that stage is reached, the attorney general, with the DPP (director of public prosecutions), will consider whether there is sufficient evidence and whether the public interest is in favor of bringing a prosecution.

Dunja Mijatovic, the freedom of media representative of the Organization for Security and Co-operation in Europe (OSCE), told BBC: I am concerned that, if approved by the attorney general, this attempt by the Metropolitan Police to apply the Official Secrets Act could create a precedent with a chilling effect on investigative journalism and could impede media freedom The right of journalists to protect the identity of their confidential sources has been repeatedly declared a basic requirement for freedom of expression by the OSCE.