Two-hundred-and-seventy people died when Pan Am flight 103 disintegrated over the Scottish town.

Rob Watson: UN officials privately hopeful, but Annan could face resistance

In August, Britain and America offered a compromise arrangement under which the Libyan suspects would be tried in the Netherlands under Scottish law before a panel of Scottish judges. The incentive for Libya is to get UN Sanctions against the country lifted.

The BBC's UN correspondent says after years of stalemate there is some optimism that a solution may at last be in sight.

Fred Echkhard, spokesman for Mr Annan, told the BBC that the UN is "something of a middle man in this".

Fred Echkhard: "Mr Annan is hopeful of progress ..."

He went on: "The lawyers have had several weeks of discussion but there are still one or two outstanding issues. The Secretary-General feels if he can speak to Colonel Gaddafi face to face, perhaps he can break the ice - at least he has to try."

Mr Annan, speaking in Tunisia before leaving for Libya, said he hoped "to be able to conclude the case once and for all during the meeting with Colonel Gaddafi".

Annan: Hoping to end impasse

Privately, UN officials say most of the legal details have now been resolved and that arrangements are in place for the two suspects to be transported to the Netherlands if the meeting is successful.

But Mr Annan's powers of persuasion will be his only available tool as the US and Britain have made clear that negotiations over issues of substance, including the need for the two men to serve their sentences in Scotland if found guilty, are out of the question.

The Libyan state news agency said yesterday that Colonel Gaddafi had no power to sign any deals with Mr Annan. The report has been interpreted as a sign that Libya may still want to delay a final solution.

But Dr Jim Swire, whose daughter was killed in the plane crash and has been leading the case for British families, said he was very positive about Saturday's meeting:

"We don't know when it will happen, but there is a lot of circumstantial evidence that the handover will happen. We are confident that in a court under the Scottish legal system, justice will be served."

Profile: Muammar Gaddafi, Libyan maverick
Profile: Kofi Annan, Master of diplomacy