Sudanese UN Ambassador El Fatha Ahmed Erwa: US was mistaken

A BBC Middle East analyst says the move is an implicit acknowledgement that Washington has no evidence to justify its action last August.

The decision to unconditionally release Saudi businessman Salah Idris' assets was taken on Monday - the day the US Government was legally required to respond to a suit he filed in February against the US Treasury.

A US aerial photograph of the factory

The suit said Washington had refused to release Mr Idris' $24m Bank of America deposits, even though the US could not prove its accusation that the factory in El Shifa, Khartoum, was being used to make chemical weapons.

The US Government insisted the plant was linked to the Islamic dissident, Osama bin Laden, whom it accused of bombing two US embassies in Africa last year.

The BBC's Kate Clark: "The effect is that Washington didn't have the evidence"

Speaking for Mr Idris, lawyer George Salem said: "Fortunately, we live in a country where we have a system of justice that requires that people produce evidence when someone is accused of being a terrorist."

Mr Idris now plans to pursue the US for full compensation for destroying the factory. The suit against the treasury and a separate action against Bank of America will now be dropped.

The US Justice department said it still believed the businessman might be involved in international terrorism, but that it was not prepared to compromise "sensitive information" for the sake of the case.

A statement said: "There are things that Mr Idris has associated himself with that I think that every American would find reprehensible. ... and we will continue to monitor his network for any potential threat to US interests."

The factory was flattened on 20 August 1998 by 13 cruise missiles, just weeks after bomb attacks on the US embassies in Kenya and Tanzania claimed the lives of 301 people.