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The judge discharged Siti Aisyah without an acquittal after prosecutors said they wanted to withdraw the charge. They did not give a reason.
She was quickly ushered out of the courtroom and into a waiting car. An emotional Aisyah told reporters she had only learned Monday morning that she would be freed. "I am surprised and very happy."
The murder trial of Vietnamese Doan Thi Huong was put on hold after the surprise development. She was to have begun giving her defense in Monday's court session, after months of delay.
Indonesian Ambassador Rusdi Kirana said he was thankful to the Malaysian government.
The two young women were accused of smearing VX nerve agent on Kim's face in an airport terminal in Kuala Lumpur on Feb. 13, 2017. They have said they thought they were taking part in a prank for a TV show. They were the only suspects in custody after four North Korean suspects fled the country the same morning Kim was killed.
Salim Bashir, a lawyer for Huong, said previously she was prepared to testify under oath for her defense.
"She is confident and ready to give her version of the story. It is completely different from what the prosecutors had painted. She was filming a prank and had no intention to kill or injure anyone," he told the AP.
Lawyers for the women have previously said they were pawns in a political assassination with clear links to the North Korean embassy in Kuala Lumpur, and that the prosecution failed to show the women had any intention to kill. Intent to kill is crucial to a murder charge under Malaysian law.
Malaysian officials have never officially accused North Korea and have made it clear they don't want the trial politicized.
Kim Jong Nam was the eldest son in the current generation of North Korea's ruling family. He had been living abroad for years but could have been seen as a threat to North Korean leader Kim Jong Un's rule.
Murder carries a mandatory sentence of hanging, but Malaysia's government plans to abolish the death penalty and has put all executions on hold until the laws are changed.