Image: Lockerbie wreckage
Peter Macdiarmid  /  Getty Images file
Pieces of Pan Am Flight 103 have been kept in a warehouse in Farnborough, England, since the 747 was blown out of the sky in 1988. Libya was linked to the bombing.
updated 5/30/2008 7:17:02 PM ET 2008-05-30T23:17:02

The United States and Libya agreed Friday to try to quickly compensate families of American victims of three terrorist attacks blamed on Libyan agents in the 1980s.

The two countries pledged to work together for a comprehensive settlement that would speed up the resolution of lawsuits that have dragged on for two decades, plus other legal and insurance cases affecting U.S. and Libyan victims.

The 1980s-era terror cases, in particular, have clouded a deal that Libyan leader Moammar Gadhafi struck to give up weapons of mass destruction in return for improved relations with the United States. Libyan officials have become increasingly frustrated by what they regard as U.S. delays in making diplomatic and political concessions to Libya.

"Both parties affirmed their desire to work together to resolve all outstanding claims in good faith and expeditiously through the establishment of a fair compensation mechanism," Libya and the U.S. said in a joint statement.

$10 million payments in Lockerbie case
Libya has long said it wants to resolve outstanding compensation claims from the U.S. families of victims of the 1980s terror attacks, but legal and financial arrangements bogged down.

Libya had agreed to pay $10 million to each victim in the 1988 bombing of Pam Am flight 103 over Lockerbie, Scotland, but it has not made the final payment because of a dispute over U.S. obligations in return.

The all-in-one deal would address the Lockerbie bombing, along with the 1986 bombing of a Berlin disco and the 1989 bombing of a French UTA airliner. It would also address about five other alleged terrorism cases involving Libyan suspects, and a handful of cases or judgments in Libyan courts as well, the official said.

A State Department official, speaking anonymously ahead of the joint statement, said both nations want "legal peace" and a clean slate.

The official offered no timetable for reaching the agreement with Libya or for actually ending the court cases. It was not clear whether the full deal could be resolved before President Bush leaves office in January 2009.

Restoring relations
The Pan Am bombing killed 270 people, including 189 Americans. Two U.S. servicemen died in the Berlin disco bombing. Libya was implicated in both cases.

The United States restored diplomatic ties with Libya two years ago and removed the North African nation from the State Department list of countries that sponsor terrorism.

The State Department's top diplomat for the Middle East, Assistant Secretary of State David Welch, led talks on the package deal with a Libyan delegation this week in London.

Libya did not propose a specific dollar amount when it broached the idea of a comprehensive settlement in March, State Department officials said.

The offer is being weighed in tandem with a Bush administration effort to shield Libya from new lawsuits under a law allowing terrorism victims to seize U.S.-based assets of state sponsors of terrorism.

The law was part of a defense policy bill that Bush signed in January.

Libya's oil beckons
The White House said the seizing-of-assets provision in the law could discourage nations like Libya that have renounced the export of terrorism from now helping the United States to fight terrorism.

There is potential for billions of dollars in investment by U.S. companies in Libya's oil sector, among other areas, meaning Libyan assets increasingly could wind up on American soil.

Libya says the new law unfairly punishes Libya after it has made concessions to the United States.

Libya was also incensed by a U.S. court decision in January ordering Tripoli to pay billions in damages to the families of seven Americans killed in the French airline explosion.

Six Libyans had been convicted in absentia in a French court on charges of carrying out the Sept. 19, 1989, bombing.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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