At a hearing in The Hague, the judges at the World Court, the United Nation's highest judicial authority, ruled that it had the right to settle the deadlock between the United States, Britain and Libya over where the trial should be held.
Libya says it will not release the two suspects for trial in Britain or the US claiming they will not get a fair trial. A total of 270 people died when a bomb exploded on Pam Am flight 103 over Lockerbie in Scotland on 21 December 1988.
To the frustration of many relatives, Britain and the US have repeatedly insisted that the accused men, Abel Basset Mohammed Al-Megrahi and Al- Amin Khalifa Fhima, must be tried either in Scotland or the US.
Yesterday Jane Swire, from Bromsgrove, Worcestershire, who lost her daughter Flora in the bombing, said she hoped it would be "the first step towards our goal of truth and justice."
Mrs Swire, whose husband Jim travelled to The Hague for the ruling, said: "If it will expedite a trial on a neutral country basis - which is what we want, I think it will be a good thing.
"I hope this will now mean there will be a trial in a neutral country, and I hope it will not take too long. The legal wheels seem to turn very slowly, and I hope they will turn a little more quickly. It is now nearly 10 years since that awful crime,".
Dr Swire, who is involved in the campaign for a trial on a neutral country and has worked as spokesman for the British families who lost relatives in the bombing, welcomed the court's decision. "I feel, probably unjustifiably, over the moon about it, very elated. To hear a learned court of this sort look at something so objectively and independently of the relative power of the two sides represented, it's really very refreshing," he said.
He agreed with the Libyan government on having a trial in a neutral country, even though "for all I know the Libyan government may well have played a part in murdering my daughter", he said. Libya did not trust the jury system and UN inspectors called in to examine the Scottish judicial system in December had expressed "very severe reservations" about it, Dr Swire said, adding: "They said the Scottish judiciary depends on the jurors entering the jury box with no preconceived ideas or knowledge of the case they are to try."
He did not think it possible to find a jury without "many preconceived notions" about the disaster. "We want truth and justice," he told BBC Radio 4's The World at One programme.
"It isn't just about the question of who killed our loved ones but also why they weren't prevented from doing it. There are a multitude of unanswered questions about the performance of British aviation security and intelligence which remain unanswered."
Responding to the ruling, the Foreign Secretary, Robin Cook, said: "This is neither a victory nor a defeat. The court has decided that it wishes to consider these complex issues in more detail at a full hearing. Meanwhile, the Resolutions of the United Nations Security Council stand: Libya must surrender those accused of the Lockerbie bombing for trial in Scotland or the United States."
The Labour MP Tam Dalyell, who supports the calls for a trial in a neutral country, also hailed the ruling, saying: "I will attempt to raise the court ruling in the House of Commons on Monday urging that the British and American governments agree with the judges that a trial should be held in a third country, preferably the Netherlands."