Diplomatic Correspondent Barnaby Mason: Mr Annan is a little more optimistic than he was 24 hours ago

In a UN statement released shortly after Mr Annan's arrival in Abu Dhabi, Mr Annan told Mrs Albright: "We are well on the way to resolving the problem." He said the Libyan Government had their own way of consulting the people and making their decision.

The announcement comes a day after the Secretary-General held a "positive and fruitful" meeting with the Libyan leader, Colonel Gaddafi, at his desert camp. No further details have yet emerged.

Same message

Clarence MItchell: The trial may have come a step closer

Libya's foreign ministry also said a settlement was "close", although the official Jana news agency later played down the significance of the meeting.

The BBC's Diplomatic Correspondent, Barnaby Mason, says Mr Annan and the foreign ministry are now giving out much the same message.

Mr Annan met the Libyan leader at his desert camp

The issue now goes before the Libyan General People's Congress, which begins meeting on Tuesday. But our diplomatic correspondent, who is in Tripoli, says it remains unclear what Colonel Gaddafi really wants, and any final decision could still take some time.

It had been thought that the congress, which is holding its annual meeting in a five day session on Tuesday, could take a decision on the suspects, but the Jana editorial has also dampened those hopes. Even after congress approval, any surrender of the two men would require unspecified "arrangements", it said.

Agreement in principle

In August, Britain and America agreed that the Libyan suspects could be tried in the Netherlands under Scottish law before Scottish judges in return for the lifting of UN sanctions.

Mr Annan's mission was intended to clarify the British and American position on the handing over of the two suspects.

After the desert meeting, Mr Annan said Tripoli had accepted the men should be tried in a foreign country. But the US Government said it was disappointed that the mission had not ended with Libya handing over the suspects, Abdel Basset Ali Mohamed al-Megrahi and Lamen Khalifa Fhimah

UK Foreign Secretary Robin Cook: Encouraged by talks

The main sticking point is thought to be the question of where the suspects would serve a sentence if they were found guilty. UK Foreign Secretary Robin Cook told the BBC that Mr Annan had made it clear to Colonel Gaddafi that there was "no point holding out for agreement for imprisonment somewhere other than Scotland".

Following Mr Annan's meeting a spokesman for the families of American victims, George Williams, said he remained optimistic about the prospect of a trial. "Usually a world leader won't go somewhere unless he knows he's coming away with something concrete - so I believe we'll hear something in a short period of time."

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