The United Nations Security Council has postponed until Friday a vote to lift more than a decade of sanctions against Libya, following French objections.
Sanctions were put in place to force Libya to co-operate
The draft resolution - tabled by Britain and Bulgaria - calls for an immediate end to a ban on arms sales and air links with Tripoli, imposed after the bombing of an aircraft over Scotland in 1988.
Libya has admitted responsibility for the Lockerbie bombing, and has offered $2.7bn to relatives of the 270 victims.
But France asked the Council to delay the vote over what it described as inadequate compensation from Libya for the bombing of a French airliner in 1989.
"In the absence of a fair agreement between the families and the Libyan side - which seems at this stage to be within reach - France would have no other choice than to oppose the draft resolution," a French foreign ministry spokesman said in a statement before the Council met.
Both Britain and the United States have said Libya has met all the requirements to have the sanctions removed.
The sanctions were suspended in 1999 after Libya handed over two men accused of the bombing of Pan Am Flight 103 above the town of Lockerbie in which 270 people died.
Libya agreed on a settlement for the victims' families, but the figure overshadowed the $33m compensation Tripoli awarded relatives of 170 people killed when a French UTA flight was bombed over Niger in September, 1989.
French authorities have been negotiating with Libya for an improved deal and have threatened to block the resolution unless an agreement is struck.
Gaddafi is keen to secure foreign investment in Libya
"What we hope is that the vote will be a little bit more delayed to obtain a settlement, and if the British insist on calling for a vote, we hope that France will veto the resolution," said Francoise Rudetzki, a representative of the French victims' families.
The French foreign ministry has said the victims' relatives will have the final say on any deal.
The vote had already been delayed to give France more time to resolve the issue.
Libyan leader Colonel Muammar Gaddafi has been hoping for an end to the sanctions, which have isolated Libya from the international community for many years.
Libya has never accepted responsibility for the downing of the UTA flight, but agreed to pay compensation after a Paris court convicted six Libyans of the bombing in absentia.