Changes were needed to prevent abuse of the law, Verhofstadt said
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Human rights groups have attacked the Belgian Government's decision to withdraw a controversial war crimes law.
The US-based organisation, Human Rights Watch has accused Belgium of giving in to pressure from the United States.
A Belgian human rights group described the decision as hypocritical and irresponsible.
The law gave Belgian courts the power to try any war crimes cases, wherever they were committed.
It had been used in attempts to indict the Israeli Prime Minister, Ariel Sharon, US President George W Bush and the UK Prime Minister, Tony Blair.
But after being re-elected in May,
Belgian Prime Minister Guy Verhofstadt said the law would be scrapped and under a new bill, only cases involving Belgian citizens or residents would be considered.
A representative of Human Rights Watch expressed sadness and shock at the announcement.
"What saddens me is that, with all the political pressure from
the United States and Israel, we have completely forgotten the
original point of the law, which was to render justice to the
victims of horrible crimes," said Geraldine Mattioli from the group's Brussels office.
"These crimes are so horrible that they are beyond understanding
and, as such, concern the whole of humanity so that we do not need
to be directly involved to be affected by these crimes."
"It's clearly a disappointment," said Dan Van Raemdonck, of Belgium's Human Rights League. "Belgium was in the lead, now it's fallen behind other countries."
An Israeli Government spokesman said Israel would remain cautious until the law had been repealed, while the US state department in Washington said it was too soon to comment.
Dropped cases
The law prompted Washington to warn that it would block further funding for Nato's new headquarters in Belgium until the legal threat was withdrawn.
Mr Verhofstadt said on Saturday the amendments would mean most of the dozens of pending cases could be dropped, although he said complaints relating to events in Rwanda, Chad and Guatemala where Belgians were directly involved could continue.
The complaints against Mr Bush, Mr Blair and US Iraq war commander General Tommy Franks had already been rejected by the Belgian authorities last month, using earlier amendments to the law.
The bill is expected to be approved by parliament in the coming weeks in a move which was initiated last month, and will bring the law in line with that from other Western states.