updated 9/13/2009 12:54:25 PM ET 2009-09-13T16:54:25

Britain's complicated relations with Libya returned to center stage Sunday as Foreign Office diplomats took the unusual step of denying a newspaper report about a secret deal with Moammar Gaddafi's regime.

The officials said there was no truth to a front-page Sunday Times article alleging that British diplomats had made a secret deal with Libya three years ago that would prevent the killer of a British policewoman from going on trial in Britain.

The newspaper said British officials seeking to make trade and oil deals with Libya secretly agreed that the person responsible for killing policewoman Yvonne Fletcher outside the Libyan embassy in London 25 years ago would not be brought to trial in Britain. The report said even her family had been kept in the dark.

Intense security
The issue is sensitive because the British government's dealings with Libya have been under intense scrutiny since the release last month of Lockerbie bomber Abdel Baset al-Megrahi, who is terminally ill with cancer.

"It is entirely misleading and simply wrong to suggest that there was a 'secret deal' over the treatment of any suspect in relation to the murder of Yvonne Fletcher," said a Foreign Office spokesman, who asked not to be identified in line with government policy.

He said the exchange of letters cited by the newspaper did not outline a secret deal but simply established that under Libyan law in effect at the time there was no way for a Libyan to be extradited to face trial abroad.

That meant any suspect in the Fletcher murder could only be tried inside Libya, the spokesman said, adding that the British government is pressing the Libyan government to allow Scotland Yard investigators to travel to Libya to pursue leads in the case.

Libya suspended its cooperation with the British police after reports surfaced of a British-led plot to kill Gaddafi, but British officials hope this can be reversed since there has been a significant thaw in ties between the two countries since Gaddafi renounced terrorism and abandoned his program to develop weapons of mass destruction.

No visible progress
Relations have been cordial since former Prime Minister Tony Blair flew to Libya to meet with Gaddafi in 2004, but there has been no visible progress in solving the Fletcher case.

Fletcher was shot dead outside the Libyan embassy in 1984. No one has been convicted for her killing, though the Libyan government has accepted that its agents were responsible.

The British government says Prime Minister Gordon Brown raised the matter with Gaddafi when the two met in July at a summit in Italy.

Brown's government has been criticized in recent weeks for making too many concessions to Libyan leader Moammar Gaddafi because of its desire for more trade and oil-related contracts, and the Sunday Times article fueled this sentiment.

William Hague, foreign affairs spokesman for the opposition Conservative Party, said an independent inquiry is needed to evaluate the entire range of the government's dealings with Libya.

"They once again stand accused of lack of candor and double dealing," Hague said of the government. "The Foreign Secretary will need to give a full and transparent account of how ministers have conducted themselves."

Liberal Democrat spokesman Ed Davey said the Times article is consistent with other reports about British diplomats cozying up to Libya for trade reasons.

"It increasingly seems as if ministers were prepared to give Colonel Gaddafi anything he wanted in return for oil, gas and arms contracts," he said.

"It's not surprising that they tried to keep this shoddy behavior secret and failed to inform Parliament, the public and even the parents of Yvonne Fletcher."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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