U.S. Considers Libyan Offer to Pay Families of Victims Killed in Three Terror Attacks

The U.S. is considering a Libyan proposal to compensate families of Americans killed in three terrorist attacks blamed on Libyan agents in the 1980s, the State Department said Thursday.

The offer would settle pending lawsuits and comes as the Bush administration tries to revive a languishing effort to improve ties with Moammar Gadhafi's government. The administration, for example, wants Congress to exempt Libya from a law allowing terrorism victims to seize U.S.-based assets of state sponsors of such attacks.

Libya long has expressed interest in resolving outstanding compensation claims from the families, but only recently has proposed a deal covering the three attacks. They include the 1986 bombing of a Berlin disco, the 1998 bombing of Pan Am flight 103 over Lockerbie, Scotland, and the 1989 bombing of a French UTA airliner.

Libya has paid two installments in the Lockerbie case but has not completed a third. It is unresolved amid the pending suits over the two other attacks.

"Libya has raised concerns of its own and suggested a way to expedite resolution of these cases through a comprehensive settlement agreement," State Department spokesman Sean McCormack said.

"The administration is exploring this possibility with Libyan representatives to determine if it would help American victims receive fair compensation in the shortest possible time and with greater certainty," he told reporters. "We remain committed to helping American victims of terrorism obtain justice through fair compensation."

Details of the Libyan proposal are unclear. It was outlined most recently in two days of meetings in London this week between the assistant secretary of state for Near Eastern affairs, David Welch, and Libyan officials, McCormack said.

Those talks came after the White House said Congress should exempt Libya from legislation that would give U.S. citizens the right to sue for the assets of state sponsors of terrorism that are held in U.S. jurisdictions.

Libya renounced terrorism and weapons of mass destruction in 2003 and no longer is on the department's list of state sponsors of terrorism. Without the waiver, Libya possibly could be sued for actions before it was removed from the list.

The idea of an exemption was cited in a March 18 letter to lawmakers from Secretary of State Condoleezza Rice, Defense Secretary Robert Gates, Energy Secretary Sam Bodman and Commerce Secretary Carlos Gutierrez. The matter also came up during Welch's talks, McCormack said.

"We're trying to work both halves of the issue," he said. "Work with the Libyan government on this idea of a fair, just, efficient, speedy, comprehensive settlement for victims of terrorism and their families, and work with Congress so that ... for the Libyan government, there's some certainty about this particular issue looking forward."

The United States had no diplomatic relations with Libya from 1980 until Gadhafi pledged to abandon his weapons of mass destruction programs, stop exporting terrorism and pay compensation to the families of victims of two of the three attacks.

Libya agreed to pay a total of $2.7 billion to families of the 270 Lockerbie victims; a final $2 million installment to each family is outstanding. It has also agreed to pay $170 million to the families of the UTA bombing victims, although the U.S. relatives opted out of that deal. A deal involving the disco bombing remains unresolved.

Along with the policy decisions, the agreements marked the beginning of the end of decades of international pariah status for Libya, once so reviled that it was the target of U.S. airstrikes ordered by President Reagan in 1986.

Libya won a reprieve from U.N., U.S. and European penalties and was allowed a seat on the U.N. Security Council. International investment has increased in Libya's oil sector, a considerable industry for a nation with a long-suffering economy.

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

Congress is holding up important elements of the rapprochement — money to open a new U.S. Embassy in Tripoli and a confirmation hearing for the new U.S. ambassador — until Libya completes compensation payments.