Libya is reportedly offering to pay $2.7 billion in compensation to the families of victims of a 1988 terrorist bombing of a U.S. jetliner over Scotland.

A New York law firm negotiating with Libya says the Libyan government is prepared to pay $10 million to each of the 270 families who lost a loved one in the bombing of Pan Am Flight 103.

However, the offer is contingent on certain conditions being met over a period of time. The lawyers say Libya wants economic sanctions lifted by the United Nations and the United States. Libya also wants to be dropped from the U.S. list of nations that sponsor terrorism.

Lead attorney James Kreindler told British radio there have been diplomatic contacts with Libya. "I'm optimistic about the progress being made in the diplomatic negotiations," he said. "From what I've heard, there has been progress and we could see Libya accepting responsibility in the near future, perhaps in a couple of weeks."

The United States and Britain have demanded that Libya accept responsibility for the attack, as well as pay compensation, before U.N. sanctions are withdrawn.

A Scottish court last year convicted a Libyan intelligence agent of planting explosives on the jetliner. A second Libyan was acquitted.

The families of British victims are reacting with caution and skepticism to the reported Libyan offer. The British foreign office says it wants to study the proposed settlement before giving its reaction.