President Bush signed legislation Monday that allows the State Department to settle all remaining lawsuits against Libya by U.S. terrorism victims and paves the way for complete rapprochement between Washington and Tripoli.

The last rifts between the U.S. and Libya can now be cleared, once the country fully compensates Americans harmed in Libyan-sponsored attacks, including the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland and the 1986 bombing of the La Belle discotheque in Berlin.

It creates a new fund to compensate the victims and grants Libya immunity from terror-related lawsuits once the secretary of state certifies that they have been paid.

Congress has blocked direct aid to Libya, as well as the construction of a new U.S. embassy there and the confirmation of the first U.S. ambassador to the nation, until U.S. victims are paid.

The bill lets the Pan Am and La Belle victims, who already have settlements with Libya, recover the full amount they're owed. Libya has paid the 268 families involved in the Pan Am settlement $8 million each, and owes them $2 million more.

But the bill leaves it to the secretary of state to determine what constitutes "fair compensation" in other cases. Some victims of other attacks, such as the 1989 bombing of French UTA Flight 772 from the Republic of Congo to Paris that killed 170, in which Libya also was implicated, say they would be deprived of just compensation.

The U.S. had no diplomatic relations with Libya from 1980 until late 2003, when leader Moammar Gadhafi pledged to abandon his weapons of mass destruction programs, stop exporting terrorism and compensate the families of victims of several attacks, including the Pan Am 103 bombing.

After that, the nation that once was a global pariah was given a reprieve from U.N., U.S. and European sanctions, removed from the State Department's list of state sponsors of terrorism and allowed a seat on the U.N. Security Council.