Libya and the United States agreed on Thursday a comprehensive deal that Tripoli would compensate US and Libyan victims in the 1988 Lockerbie bombing of Pan Am Flight 103, said reports reaching here from Tripoli.

Top US diplomat for the Middle East, David Welch (Front left) and Ahmed al-Fatouri (Front right), head of America affairs in Libya's Foreign Ministry, are seen during the ceremony of signing a cooperation agreement, in front of members of both delegations, in Tripoli, Libya Thursday, Aug. 14, 2008.(Xinhua/AFP Photo)

The deal was signed by visiting US Assistant Secretary of State David Welch, top US diplomat for the Middle East, and Libya's Foreign Ministry official Ahmed al-Fatouri.

All outstanding lawsuits against Tripoli by American victims of terrorism were settled on Thursday, paving the way for the full restoration of diplomatic relations between the two sides, said media reports.

The details of the deal had not been publicly announced, but some reports quoted a senior Libyan government official as saying that there were 26 pending lawsuits against Libya for the 1988 bombing over Lockerbie, Scotland, which killed 270 people, and other attacks.

Libyans who were killed in 1986 when US warplanes bombed Tripoli and Benghazi are also covered by the pay-out, other Libyan officials said.

Washington had no diplomatic relations with Tripoli from 1980. But in late 2003, Libya pledged to abandon its weapons of mass destruction programs, stop exporting terrorism and compensate the families of victims of the Lockerbie bombing and other attacks.

Afterwards, Libya was given a reprieve from the UN and Western sanctions. Thursday's signing completes a nearly five-year effort to rebuild ties between the US and Libya, said media reports.

Top US diplomat for the Middle East, David Welch (L) and Ahmed al-Fatouri (R), head of America affairs in Libya's Foreign Ministry, shake hands after signing a cooperation agreement in Tripoli, Libya Thursday, Aug. 14, 2008.(Xinhua/AFP Photo)

(Xinhua News Agency August 15, 2008)