Libya Says It Needn't Finish Payments to Flight 103 Victims' Families

Libya declared yesterday that it no longer has a legal obligation to make final payments of $2 million to each of the families of those killed in the bombing of a Pan Am flight in 1988, saying the agreement calling for the payments had expired. But it left open the possibility that it still might turn over the money.

Under international pressure, Libya took responsibility four years ago for the attack on Flight 103 over Lockerbie, Scotland, and agreed to pay as much as $10 million in three installments to each of the families of the 270 dead. The payments were linked to a series of conditions aimed at easing restrictions on the government of Moammar Gaddafi.

The first installment of $4 million came when the United Nations ended its sanctions, and a second $4 million followed the lifting of some U.S. sanctions. A third and final payment was due if the United States removed Libya from the list of nations sponsoring terrorism -- a move decided last month and scheduled to take effect Thursday.

But in a statement yesterday, the Libyan legal team handling the case said the deadline in the original agreement for dropping Libya from the list had passed at the end of 2004, after several extensions. Consequently, the statement said, the escrow account set up to hold the money for the final payments was dissolved early last year and the funds returned.

At the same time, the statement created a measure of ambiguity about Libya's intentions by stopping short of saying that Tripoli would refuse to make the last payments.

In recent talks with lawyers representing the victims' families, the Libyan legal team indicated that opposition to making the final payments exists within the Gaddafi government. But James P. Kreindler, a lead U.S. lawyer in the case, said the absence of an explicit rejection in yesterday's statement leaves the door open for Libya to meet its initial financial commitment, a view shared by some State Department officials who are following the case.

"I believe that Libya will do the right thing and make the last payment," Kreindler said in a telephone interview. "But we haven't gotten confirmation of that."

Speculation about Libya's motives in issuing yesterday's statement centered on the possibility that the government simply wanted to assert its legal rights and rebut allegations that it has not acted in good faith in the settlement.

U.S. lawyers have argued that Libya remains obligated to pay the third installment, regardless of whether the escrow account expired. But Libyan authorities have insisted they are no longer bound by the original agreement.

Apart from the legal arguments, U.S. representatives have urged the Libyans to follow through on their initial commitment as a matter of smart politics. Libya has been enjoying an end to two decades of international isolation as a result of its willingness to accept responsibility for the plane attack and its subsequent decision in 2003 to abandon its nuclear, chemical and biological weapons programs after secret negotiations with U.S. and British officials.

Calls to Libyan officials in Washington yesterday were not returned.

In the event no further payments are forthcoming after Thursday, Kreindler said, the victims' families would probably take legal action against Libya in federal court in New York.

"We would argue there's been a breach of the good-faith provision," he said. "But letting this drag out for another two or three years is not good for anyone. "

Reflecting strong congressional sentiment to compel the final payments, some House members are backing a proposed amendment to the State Department's appropriations bill that would block funds for restoring diplomatic relations with Libya until it honors its financial commitments to the families.

"How can the U.S. possibly be expected to trust Libya when they are depending on a legal technicality to absolve them from their promise to pay restitution to the families?" Rep. John E. Sweeney (R-N.Y.), the amendment's sponsor, asked in a statement yesterday. "Libya must follow through as a show of good faith to the world that they regret past actions by making full and immediate reparations to the families."