Libya signs bombing compensation deal with U.S.

By Salah Sarrar

TRIPOLI (Reuters) - Libya and the United States signed a deal on Thursday to compensate all U.S. and Libyan victims of bombings or their relatives, clearing the way for the former foes to improve faltering ties.

U.S. victims covered include those who died in the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, that killed 270 people and the 1986 attack on a Berlin disco that killed three people and wounded 229, Libyan officials said.

It also covers Libyans killed in 1986 when U.S. planes bombed Tripoli and Benghazi. Forty people died.

"This will turn a new page in our relationship," David Welch, U.S. assistant secretary of state for Near Eastern affairs, said at the signing ceremony in Tripoli.

Ties between OPEC member Libya and the United States have improved dramatically since 2003, when Libya accepted responsibility for the Lockerbie bombing and said it would stop pursuing nuclear, chemical and biological weapons.

Since then, the United States has dropped many sanctions, removed Libya from a terrorism blacklist and restored diplomatic links after decades of enmity. Muammar Gaddafi's Libya has slowly emerged from its international isolation.

But Libya objected early this year to new U.S. legislation to enable terrorism victims to collect damages from governments such as Libya by having their assets frozen. The deal on Thursday resolves that dispute.

"This international agreement between the two sides ends any pending issue between Tripoli and Washington. It clears the way for normal and complete relations between Libya and the USA," Azzam Eddine of the Libyan negotiating team told Reuters.

Welch told reporters he was optimistic the deal would be implemented soon: "This agreement will settle the last major issue, which is compensation."

END LEGAL LIABILITY

Thursday's agreement would end the legal liability to Libya stemming from multiple lawsuits by families of the U.S. victims, the Libyan officials said.

They declined to give financial details on the compensation, including who would pay the Libyan victims. Among the dead in the U.S. bombings was Gaddafi's adopted daughter.

In Washington, State Department spokesman Robert Wood also declined to provide figures but said the deal was pursued on a "purely humanitarian basis" and did not constitute an admission of fault by either party.

He said an international Humanitarian Settlement Fund would be established in Libya to collect "the necessary resources" for the claims on both sides. He provided no details on who would contribute to the fund.

"Each side will be responsible for distributing the resources it receives to its own nationals and to ensure the dismissal of any related court actions," Wood said.