TRIPOLI (Reuters) - Swiss President Hans-Rudolf Merz apologized to the Libyan government on Thursday for the brief detention last year of a son of Libyan leader Muammar Gaddafi, clearing the way for a return to normal diplomatic ties.
"We are apologizing for what happened to Hannibal Gaddafi and the two sides agreed to form a committee to discuss the matter," Merz told reporters in Tripoli.
Libyan Prime Minister Al-Baghdadi Ali Al-Mahmoudi said the two countries had agreed on a "normalization" of their relationship, a decision that was confirmed by Merz.
The row began when Hannibal Gaddafi and his pregnant wife Aline were arrested in a Geneva luxury hotel in July 2008 on charges of mistreating two domestic employees. Armed police forced open their hotel suite after being alerted to repeated altercations.
Libya cut back oil supplies to Switzerland and withdrew more than $5 billion in assets from Swiss banks in 2008 over the incident.
Geneva's prosecutor dropped the case in September last year following the withdrawal by the plaintiffs of their formal complaint after they reached an undisclosed settlement with the Gaddafis.
A Geneva lawyer representing Libya and the Gaddafis said in April they had sued the Geneva authorities for more than 500,000 Swiss francs. A hearing on the civil suit was due next month.
Switzerland's government said last month it wanted to hold a summit with Gaddafi to defuse the row and that Merz was prepared to meet the Libyan leader soon.
A Swiss statement said that two Swiss who have been detained in Libya will be able to leave the country "in the next few days."
Swiss officials have named one of the Swiss prevented from leaving Libya as Max Goeldi, director of Swiss-Swedish electrical engineering conglomerate ABB in Tripoli, but have declined to identify the other.
"Both countries agree to set up independent arbitration to investigate the circumstances of the arrest of Hannibal Muammar Gaddafi and his wife," the statement said, adding that Switzerland was prepared to apologize for the "unseemly and unnecessary" arrest of Gaddafi and his family.