Payback Time? Libya May Be Near Victim Compensation Deal

May 30, 2008 — -- The United States and Libya have agreed to establish a system to resolve outstanding terror reparation payments owed to American victims of Libyan terror acts in the 1980s.

The agreement would lump all outstanding claims together in an effort to settle them all, once and for all. It remains unclear when the talks will begin or how long they will last.

"Both parties affirmed their desire to work together to resolve all outstanding claims in good faith and expeditiously through the establishment of a fair compensation mechanism," a joint statement issued late Friday said.

The outstanding payments have held up further rapprochement between the United States and the former pariah country, in large part due to recent legislation passed by Congress that withholds funding for a new U.S. embassy in Tripoli until the payments go through.

Libya settled a case in U.S. courts with the terror victims of the 1988 Pan Am flight 103, which exploded over Lockerbie, Scotland.

Each victim's family was to receive $10 million over three payments, the last $2 million of which was due when Libya was removed from the U.S. State Department's State Sponsor of Terrorism list. That happened in 2006, but was technically beyond the timeline articulated in the court agreement.

Jim Kreindler, a lawyer for the Lockerbie families, told ABC News Thursday that his clients just want their remaining payment and would welcome any mechanism to arrive at that goal.

Assistant Secretary of State for Near Eastern Affairs C. David Welch led the U.S. delegation at talks in London with his Libyan counterparts, the most overt American government involvement in terror reparations with Libya to date.

The settlement talks will seek to resolve outstanding payments for terror victims including those in the Lockerbie bombing, as well as others from a 1986 bombing at a disco in Berlin in which two U.S. servicemen were killed.

Sen. Frank Lautenberg, D-N.J., who has championed the cases of U.S. victims of Libyan terror, recently pushed through legislation that would allow terror victims to seize assets of the country in the United States. Libya has sought to shield itself from those claims.