€2.4bn for Lockerbie victims

LIBYA has agreed to set up a €2.4 billion fund for families of 270 people killed in the 1988 Pan Am bombing, the families' lawyers said, a move that could end UN sanctions and resolve an issue that has made the country an international pariah.

The agreement, which was reached on Wednesday, was due to be followed by a letter to the United Nations admitting responsibility for the attack, said the e-mail signed by attorneys James P Kreindler and Steven R Pounian.

The attorneys appeared confident that sanctions would be lifted quickly, but US and UN diplomats were sceptical.

Sanctions imposed by the Security Council in 1992 were suspended in 1999 after Libya handed over two agents, who had been indicted for the Pan Am bombing over Lockerbie, Scotland, for trial.

However, under the UN resolution, the ban on arms sales and air links to Libya can't be lifted permanently until Libya acknowledges responsibility for the bombing, pays fair compensation, renounces terrorism and discloses all it knows about the explosion.

The plane was blown up after taking off from London en route to the United States; most of those killed were Americans.

The agreement setting up an escrow account at the Bank for International Settlements in Switzerland, known as the BIS, was reached after an 11-hour session in London, according to the e-mail.

The bank, with headquarters in Basle, Switzerland, confirmed earlier Wednesday it was asked to manage an escrow account "from which claimants will be compensated". Libya will pay up to €9 million for each victim, lawyers have said.

Under the deal, UN diplomats said the Libyan government will start transferring the €2.4 billion into the escrow account immediately.

The Libyan government then will send a letter to the Security Council saying it met the conditions for lifting sanctions, the diplomats said.

The United States and Britain also will send letters to the council saying they believe Libya has met the requirements to have sanctions lifted and Britain will circulate a draft resolution doing so, the diplomats said.

A United States official in Washington said the Bush administration was uncertain about lifting the sanctions and was weighing whether to abstain or support the British-drafted resolution.

The compensation deal calls for Libya to pay each victim's family €3.5m when UN sanctions against Libya are lifted, another €3.5m when the United States lifts its own sanctions against the country and €1.75m when Libya is removed from the State Department's list of countries sponsoring terrorism, said Mark Zaid, an attorney representing more than 50 relatives of victims.

After Libya deposits the money in Switzerland and sends its letter to the Security Council, "we expect the UN Security Council to enter a resolution lifting the UN sanctions against Libya which will trigger the payment of €3.5m per case to our New York trust account", the lawyers said in their e-mail to family members.

Mr Kreindler did not return a message left at his office after business hours.

American Daniel Cohen, who lost his only daughter, 20-year-old college student Theodora Cohen in the atrocity, said the level of compensation was not the issue.

"This is supposed to be about justice, it's supposed to be about punishment. It is not supposed to be about blood money and a tawdry pay-off and that's all I'm afraid we're going to get out of this."

Gadaffi was asked on television earlier this month if his country accepted responsibility and was prepared to pay compensation. He did not answer directly but said negotiators were nearing a conclusion.

Libya's foreign minister has said that his government had accepted "civil responsibility" for the plane's downing.

Several US sanctions against Libya, some predating the Pan Am 103 bombing, also remain on the books and officials have said it was unlikely that they would be lifted soon because of pressure from family members and from some in the administration who believe that Libya is secretly developing chemical weapons.

The US sanctions bar most Americans from using their passports to travel in Libya. Also, it has been illegal since 1986 for US oil companies to operate in Libya.

In 2001, a Scottish court held in Camp Zeist, Holland, convicted Libyan intelligence agent Abdel Basset Ali al-Megrahi of the bombing and sentenced him to life imprisonment. A second Libyan was acquitted.