British injured and bereaved may receive no compensation

British victims of the US terrorist attack may be left without a penny of official compensation despite serious injuries, trauma and the loss of close relatives.

Lawyers have confirmed that, under the hard-nosed US compensation system, survivors and relatives are only entitled to a pay-out once other sources of additional income, including social security entitlements and life insurance policies, have been deducted. Even gifts to the bereaved from charities or private individuals could be counted against final payments – whatever the victim's nationality.

Geraldine McCool, a solicitor advising British companies who lost a number of employees in the attack on the World Trade Centre, said she was concerned that victims' families could miss out because of the deductions.

"That is not the case in this country where in similar schemes such as Hillsborough these are not taken into account," said Ms McCool, who works for the Manchester and London law firm, Leigh Day and Co. She criticised the British government for not doing enough to advise UK families and firms on compensation.

Emergency legislation was introduced in the US after 11 September to set up a government compensation scheme for which the final rules will be drawn up in the next few weeks. Under its initial proposals, only relatives of the dead passengers would have benefited. But the scope of the planned deal has now been broadened to take account of anyone who has a personal injury claim associated with the attacks.

It seems unlikely, though, that claims for psychological damage as a result of witnessing the horrific destruction of the twin towers or the Pentagon will receive official compensation.

Ken Nolan, the senior partner of New York firm Speiser, Krause, Nolan, Granito, confirmed that compensation payments would normally be subject to deductions as a matter of course under American law. Mr Nolan is liaising with UK law firms over the US Government's compensation scheme which, following lobbying from US and British lawyers, has been set up to benefit all personal injury victims of the attacks.

Lawyers are advising clients to wait until the full details of the scheme are published before deciding whether to apply for the compensation rather than beginning separate legal action against the airlines, their employers or the state.

Ms McCool, who acted for the ground victims of the Lockerbie bombing in their successful case against Pan Am, said the families of the dead passengers had a strong case against the airlines. But she warned there was a real risk that there might not be enough compensation to go round if insurers collapsed under the weight of the initial claims.

British claimants will not receive legal aid to help them with their claims in America.