There is more information here on Pan Am Flight 103:
http://en.wikipedia.org/wiki/Pan_Am_Flight_103
excerpt:
Compensation from Libya
On May 29, 2002, Libya offered up to US$2.7 billion to settle claims by the families of the 270 killed in the Lockerbie bombing, representing US$10 million per family. The Libyan offer was that:
- 40 percent of the money would be released when United Nations sanctions, suspended in 1999, were cancelled;
- another 40 percent when U.S. trade sanctions were lifted; and
- the final 20 percent when the U.S. State Department removed Libya from its list of states sponsoring terrorism.
Jim Kreindler of New York law firm, Kreindler & Kreindler, which orchestrated the settlement, said:
"These are uncharted waters. It is the first time that any of the states designated as sponsors of terrorism have offered compensation to families of terror victims."
The U.S. State Department maintained that it was not directly involved. "Some families want cash, others say it is blood money," said a State Department official.
Compensation for the families of the PA103 victims was among the steps set by the UN for lifting its sanctions against Libya. Other requirements included a formal denunciation of terrorism—which Libya said it had already made—and "accepting responsibility for the actions of its officials".[31][32]
Over 18 months later, on December 5, 2003, Jim Kreindler revealed that his Park Avenue law firm would receive an initial contingency fee of around US$1 million from each of the 128 American families Kreindler represents.
The firm's fees could exceed US$300 million eventually. But Kreindler argued:
"Over the past seven years we have had a dedicated team working tirelessly on this and we deserve the contingency fee we have worked so hard for, and I think we have provided the relatives with value for money."
Another top legal firm in the U.S., Speiser Krause, which represented 60 relatives, of whom half were UK families, was understood to have concluded contingency deals securing them fees of between 28 and 35 percent of individual settlements. Frank Greneda of Speiser Krause commented:
"Sure the rewards in the U.S. are more substantial than anywhere else in the world but nobody has questioned the fee whilst the work has been going on, it is only now as we approach a resolution when the criticism comes your way."
On August 15, 2003, Libya's UN ambassador, Ahmed Own, submitted a letter to the UN Security Council formally accepting "responsibility for the actions of its officials" in relation to the Lockerbie bombing.[33] The Libyan government then proceeded to pay compensation to each family of US$8 million (from which legal fees of about US$2.5 million were deducted) and, as a result, the UN cancelled the sanctions that had been suspended four years earlier, and U.S. trade sanctions were lifted. A further US$2 million would have gone to each family had the U.S. State Department removed Libya from its list of states regarded as supporting international terrorism, but as this did not happen by the deadline set by Libya, the Libyan Central Bank withdrew the remaining US$540 million in April 2005 from the escrow account in Switzerland through which the earlier US$2.16 billion compensation for the victims' families had been paid.[34] The United States announced resumption of full diplomatic relations with Libya after deciding to remove it from its list of countries that support terrorism on May 15, 2006.[35]
Some observers believe that Libya's acceptance of responsibility amounted to a business deal aimed at having the sanctions overturned, rather than an admission of guilt. On February 24, 2004, Libyan Prime Minister Shukri Ghanem stated in a BBC Radio 4 interview that his country had paid the compensation as the "price for peace" and to secure the lifting of sanctions. Asked if Libya did not accept guilt, he said, "I agree with that."
He also said there was no evidence to link Libya with the April 1984 shooting of police officer Yvonne Fletcher outside the Libyan Embassy in London. Gaddafi later retracted Ghanem's comments, under pressure from Washington and London.[36]
A civil action against Libya continues on behalf of Pan Am, which went bankrupt partly as a result of the attack. The airline is seeking $4.5 billion for the loss of the aircraft and the effect on the airline's business.[37]
In the wake of the SCCRC's June 2007 decision, there have been suggestions that, if Megrahi's second appeal is successful and his conviction is overturned, Libya could seek to recover the $2.16 billion compensation paid to the relatives.[38]
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The imprisonment of the medics has caused an international outcry
A fundamental factor in the decisions that relate to Scotland in any prisoner transfer agreement, if one is agreed, are what the Scottish Parliament and executive want 
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