Libya is to accept responsibility for the Lockerbie bombing and pay $2.7bn (£1.6bn) in compensation to the families of the 270 people who died.
Almost 15 years after Pan Am flight 103 exploded over the small Scottish town, the governments of Britain, the US and Libya have, for the first time, reached an agreement that will lead the way to the lifting of sanctions against the regime of Colonel Muammar Gaddafi and open up his country to further trade opportunities. Either tomorrow or on Friday, Libya is expected to place a letter before the UN Security Council in New York, accepting in general terms responsibility for the 1988 bombing and making clear its readiness to start paying compensation. Britain will respond with a letter accepting Libya's offer.
"There is now sign-off from all three governments. All that is left are the practical steps," said one diplomat.
The agreement came after trilateral talks in London on Monday between senior officials of the three countries. It was the latest in a series of talks in which officials have tried to hammer out an agreement. Of the half-dozen requirements laid out by a UN resolution in order for sanctions to be lifted, the acceptance of responsibility and the form of compensation have been the most difficult to finalise. The exact wording of Libya's letter is not clear, though it is expected Tripoli will say it has to accept responsibility because a Libyan agent, Abdelbaset Ali Mohammed al-Megrahi - the man convicted in 2000 of planting the bomb - was a government employee. A second Libyan suspect, Al Amin Khalifa Fhimah, was found not guilty.
Tripoli has always denied ordering the attack. Last month Mr Gaddafi's son Saif Islam Gaddafi said: "We regard ourselves innocent and we had nothing to do with that tragedy." He said Libya had a commitment "to accept the outcome of the trial".
Lawyers and diplomats have been working to establish an escrow account at the Bank of International Settlements in Switzerland, into which Libya will pay the compensation money, amounting to $10m for each of the families of the people who died. Court-appointed lawyers will meet Libyan officials today in Europe to finalise the release of the money.
The payments are likely to be staggered, with $4m being paid when UN sanctions - imposed in 1992 and suspended in 1999 when Colonel Gaddafi surrendered the two suspects - have been formally lifted. Another $4m is likely to be paid when the US lifts its sanctions, and the final $2m should be released if and when Libya is removed from the State Department terror list.
It was reported yesterday that a plan has already been worked out for the UN sanctions to be lifted, with Britain introducing a resolution to end them with America abstaining from the vote. Britain has already reinstituted full diplomatic relations, which were severed in 1984 when PC Yvonne Fletcher was killed while on duty outside the Libyan embassy in London.