Libya offers £1.8bn Lockerbie payout

Libya has made a formal offer to pay $2.7bn (£1.8bn) compensation for the Lockerbie bombing – a total of $10m (£7m) for each of the 270 people who died when the Pan Am Flight was destroyed above the Scottish border town.

Diplomatic sources said the deal would have been personally approved by Colonel Muammar Gaddafi. A US law firm appointed to represent the families of those who died, confirmed the offer – long since expected – had finally been made in a formal proposal. The lawyer said it was now up to the families to decide whether to accept the amount offered. Libya has attached conditions over the timing of the release of the money in relation to the lifting of sanctions

"We are pleased to inform you that after 10 months of difficult and intricate negotiations in New York, London and Paris, we have finally obtained a settlement offer from Libya that we recommend to you," said a letter from Jim Kreindler of New York firm Kreindler and Kreindler, which was sent to victims' families. "These are uncharted waters. It is the first time that any of the states designated as sponsors of terrorism [by the US State Department] have offered compensation to families of terror victims."

The Independent reported earlier this year how senior officials from Britain, the US and Libya were involved in secret negotiations to broker a deal that would see the north African country accept general responsibility for the 1988 bombing and pay compensation as precursor to the lifting of UN sanctions. Last night, British relatives of those who died in the plane bombing welcomed the offer.

The Reverend John Mosey, who lost his 19-year-old daughter, Helga, said the money would go some way towards "lightening the burden" of his family's loss.

He added: "Obviously it's just another chapter closed and one can't pretend one isn't pleased. One isn't unhappy to have a little more money, but this is not compensation it's blood money."