Libya Terror Compensation Agreement Sent to Bush

Janine Zacharia Fri Aug 1, 5:02 PM ET

Aug. 1 (Bloomberg) -- Congress approved legislation allowing Libya to settle the remaining claims by the families of U.S. victims of its state-sponsored terrorism and gain immunity from future lawsuits.

Under the measure approved by the House and Senate yesterday, Libya would put money into a fund to pay the claims and then would be immune from further lawsuits for the attacks, including the bombing of a Pan Am jet over Lockerbie, Scotland, in 1988.

The measure would result in more than $800 million in compensation being paid.

Secretary of State Condoleezza Rice said she hoped the legislation ``will help our fellow citizens close a painful chapter in their lives,'' according to a statement today. ``The United States also looks forward to expanding its relationship with Libya and its people as we resolve contentious issues from the past.''

Most crucially for U.S. businesses, once Rice certifies that Libya has paid the compensation due, the U.S. would formally immunize Libya from any further claims, and all American oil and financial companies -- which have been reluctant to invest in Libya while the lawsuits persisted -- could do business there without fear of penalty, an administration official said.

Nullify a Provision

The new agreement, if honored by Libya, would essentially nullify a provision of a law, sponsored by Senator Frank Lautenberg, a New Jersey Democrat, and passed in January, that allows victims to sue countries that were once designated state sponsors of terrorism. That law allows victims to seize assets for compensation if they win judgments in court. Lautenberg welcomed the new legislation.

The money paid by Libya would be directed to the families of those killed in the 1988 Pan Am 103 bombing over Lockerbie, Scotland, who have not yet received compensation, families of the victims of the 1986 La Belle nightclub bombing attack in Berlin, and to victims of other outstanding terrorism cases in which Libya was alleged to be involved.

The bombing of the Pan Am flight killed 270 people. In the Berlin attack, two U.S. soldiers and a Turkish woman were killed, and 200 others were injured.

The U.S. and Libya have been working for months to resolve the compensation claims, which are blocking full relations and deterring American investment in the oil-rich nation. The U.S. removed from its state sponsors of terrorism list in 2006.

Berlin to Rome

The State Department's assistant secretary of state for near eastern affairs, David Welch, has met with Libyan officials in Berlin, London, Paris and Rome in the past four months to work out the agreement, which was completed in Abu Dhabi last week.

He will fly to Tripoli to sign the agreement about two weeks after Bush signs the legislation. Bush may sign the legislation as early as Aug. 4.

Rice has postponed planned visits to Libya amid the compensation dispute.

The victims' families welcomed passage of the bill.

The Pan Am 103 families ``are deeply heartened by this decisive action,'' Kara Weipz, a spokeswoman for them, said in a statement. ``The legislation is a critical step in our fight for justice for our loved ones.''

U.S. companies are trying to compete for contracts in Libya to develop the North African country's oil and gas industries and other infrastructure projects.

Libya, which holds Africa's largest oil reserves, wants to boost output to 3 million barrels of crude a day by 2013 from the current 1.74 million barrels.

To contact the reporter on this story: Janine Zacharia in Washington at jzacharia@bloomberg.net .