U.S., Libya near deal to compensate terror victims

By Arshad Mohammed

WASHINGTON (Reuters) - Libya would pay hundreds of millions of dollars to compensate U.S. victims of terrorism under a tentative agreement that hinges on action by the U.S. Congress, sources familiar with the accord said on Wednesday.

The United States and Libya worked out the tentative deal to resolve all outstanding cases of what Washington regards as past Libyan terrorist acts that killed or injured Americans.

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.

Long estranged, the two nations have dramatically improved relations since Libya's 2003 decision to abandon its pursuit of chemical, biological and nuclear weapons.

Under the deal, Libya would set aside $536 million to pay the remaining claims from the 1988 Lockerbie bombing and $283 million to compensate those killed and injured in the bombing of a West Berlin disco in 1986, said attorney Jim Kreindler, whose law firm represents 130 Lockerbie victims.

Two hundred and seventy people died when a bomb destroyed a Pan Am flight over Lockerbie, Scotland in December 1988. The Berlin disco bomb killed three and injured 229.

The deal would also set aside additional funds to compensate victims of other incidents blamed on Libya, possibly bringing the total payout to more than $1 billion.

To implement the tentative agreement, however, Congress would have to relieve Libya of the effects of a law enacted this year making it easier for terrorism victims to collect damages by having the assets of target governments frozen.