Updated

A Scottish court on Tuesday allowed the Lockerbie bomber to drop an appeal against his conviction — a step that could lead to the Libyan man's possible release or transfer to a prison in his homeland.

Libya wants Abdel Baset al-Megrahi sent home, but U.S. Secretary of State Hillary Clinton has urged Scotland to keep him in prison to serve out his 27-year sentence. Seven U.S. senators — including Edward Kennedy and John Kerry — also wrote to Scottish Justice Minister Kenny MacAskill with a similar request.

Al-Megrahi, 57, was convicted in 2001 of taking part in the bombing of Pan Am Flight 103 on Dec. 21, 1988. The airliner — which was carrying mostly American passengers to New York — blew up as it flew over Scotland. All 259 people aboard and 11 more on the ground died when the aircraft crashed into the Scottish town of Lockerbie.

A judicial review of al-Megrahi's case two years ago raised serious questions about the evidence used to convict him, spurring his appeal. But people with pending appeals cannot be transferred to another country — a fact that prompted al-Megrahi's request for permission to abandon his appeal.

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The Scottish court still has to hear a separate appeal by the government, which feels the bomber's 27-year minimum sentence is too short.

Scotland's justice minister could, however, free the terminally ill al-Megrahi now on compassionate grounds — a prospect that has angered some of the victims' families.

Margaret Scott, Al-Megrahi's lawyer, told the court that her client has advanced prostate cancer and had been given only months to live.

"This has now reached the terminal phase and he is in severe pain and in great distress," she said.

MacAskill has said he will decide within two weeks whether to release al-Megrahi on compassionate grounds, transfer him to a Libyan prison, or keep him in a Scottish jail.

Though judges agreed Tuesday to remove one barrier to the prisoner's possible release, they said other legal obstacles remain. Al-Megrahi would not be eligible to be transferred to a Libyan jail until the government appeal is heard Sept 8.

Some British media had reported that MacAskill could free al-Megrahi on compassionate grounds in time for the Muslim holy month of Ramadan, which begins Saturday. That would allow him to fly back to Libya a free man.

However, Scotland's government said Tuesday that no decision has yet been made.