Bush signs law allowing Libya compensation deal

(Adds victims' families group reaction, paragraphs 8-9)

WASHINGTON, Aug 4 (Reuters) - U.S. President George W. Bush on Monday signed into law legislation paving the way for Libya to pay hundreds of millions of dollars to compensate U.S. victims of bombing attacks that Washington blames on Tripoli.

The Libyan Claims Resolution Act clears the way to resolve all outstanding U.S. claims related to what Washington regards as Libyan terrorist acts.

These include the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, that killed 270 people and the 1986 bombing of a Berlin disco that killed three people and wounded 229.

"For too many years, Libya has refused to accept responsibility for its horrific acts of terrorism against American victims," said Sen. Frank Lautenberg, the New Jersey Democrat who sponsored the original legislation to allow compensation.

"But after the pressure we applied, Libya will finally be held accountable for these devastating events. Our bill becoming law means these victims and their families can get the long overdue justice they deserve."

The United States and Libya worked out a tentative deal to resolve all the outstanding cases. Libya has yet to sign the agreement but U.S. officials said they expected it to do so after the deal was signed into U.S. law.

Bush signed the bill before leaving Washington on a week-long visit to Asia.

A group of Lockerbie victims' families said the new moves brought them a step closer to holding Libya accountable.

"It is a relief to say that this part of our fight is coming to an end. There's still more work to be done and the families aren't done fighting for the truth," said Kara Weipz, spokeswoman for the Families of the Victims of Pan Am 103. "There are still a lot of things that we want to know."

Under the arrangement, Libya would not accept responsibility for the acts, but would provide the money to compensate the victims.

If carried out, the deal could end the legal liability to Libya stemming from multiple lawsuits by families of the U.S. victims, and it could herald a further warming in ties between Tripoli and Washington. (Editing by Mohammad Zargham)