Libya's ambassador to London, Muhammad al-Zouai said such a deal was possible, provided France did not block the settlement of the Lockerbie issue.

"It is possible to reach a humanitarian accord through the Qadhafi Foundation which will study the requests of the victims' families," al-Zouai said.

"France for its part should not block a settlement of the Lockerbie issue," he added, referring to the 1989 bombing of a Pan Am flight over the Scottish town.

Libya accepted responsibility for the Lockerbie bombing last week as part of a deal with London and Washington to end more than a decade of UN sanctions.

Dispute

It agreed to pay $2.7 billion in compensation to the families of Lockerbie victims once the UN sanctions were lifted.

UK presented a resolution to the Security Council soon after, proposing to end the sanctions, but France dragged its feet.

France has been insisting Libya pay similar compensation to families of the victims of the bombing over Niger as well, before sanctions could be ended.

Paris has threatened to veto the UK-sponsored resolution unless Libya complied.