TRIPOLI Libya and the United States signed a deal yesterday to compensate all US and Libyan victims of bombings or their relatives.

The US victims include those who died in the 1988 Lockerbie bombing that killed 270 people and the 1986 attack on a Berlin disco that killed three people and wounded 229.

Libyans killed in 1986 when US warplanes bombed Tripoli and Benghazi are also covered by the pay-out.

Libya said at least 40 people were killed in the US strikes, including leader Muammar Gaddafi's adopted daughter.

"This international agreement between the two sides ends any pending issue between Tripoli and Washington. It clears the way for normal and complete relations between Libya and the USA," said Azzam Eddine, a Libyan negotiator. In Washington, a State Department official confirmed the signing.

After more than a decade of isolation, Libya has been coming in from the cold since 2003, when it accepted responsibility for the Lockerbie bombing and announced its would stop pursuing weapons of mass destruction.

The UN lifted multilateral sanctions in 2003.

The latest accord would end Libya's liability to legal action by families of the US victims and would allow a further warming in ties between Tripoli and Washington, the Libyan officials said.

George W Bush this month signed a law paving the way for Libya to pay hundreds of millions of dollars to US victims of bombings that Washington blames on Tripoli.-AP