Mr Blair joined US President Bill Clinton in softening his line on holding the trial in a third country.

The Question Time announcement appeared to contradict a statement by Foreign Office minister Tony Lloyd on Tuesday.

He reaffirmed the government's long-standing refusal to hold a trial outside the US or Scotland, over which the Pan Am jet exploded in 1988 killing 270 people in the air and on the ground.

Tony Blair says he is "looking at alternative ways"

Mr Blair told the Commons: "It has been our wish that the trial take place in Scotland or the US and I reject claims that there should be any difficulty about a fair trial in Scotland.

"As the result of no progress having being made, however, we are prepared to look at alternative ways of giving families the justice they deserve.

Tony Blair: The families deserve justice

"That is why we launched discussions with the US and the Dutch about the possibility of a trial in a third country.

"However, there are many legal and other complexities to be overcome before we can be sure that this is the right way to proceed, and until those issues are resolved no final decision can be made."

He added: "We've got to be sure, however, that any solution we come up is fully consistent with our absolute commitment to the integrity of the Scottish judicial system."

Clinton talks confirmed

A spokesman for Mr Blair confirmed that he had held talks with Mr Clinton "several times" over the issue.

The US president confirmed the plan to explore the use of a third country.

Libya has previously said it would be prepared to allow two suspects in Tripoli, Abdel Baset Ali Mohammed el-Megrahi and Al-Amine Khalifa Fhimah, to undergo trial in a so-called neutral country.

Despite six years of international sanctions, it has continued to refuse to hand the pair over for trial in the US or Scotland.

Some victims' families, particularly those in Britain, have long supported the idea of a holding the trial in the International Court in The Hague.

Mr Clinton said on Wednesday said "there may be some possibility" of holding the long-awaited trial in a neutral nation.

A Dutch Government spokeswoman revealed that Britain and the US had contacted the Dutch Government to explore the possibility of a trial in The Hague.

But she refused to indicate when the talks took place, saying only that they had been contacted "some time ago".

Relative attacks government

Dr Jim Swire: "America is the voice that really matters"

Earlier the father of one of the British victims of the bombing attacked the UK Government for Tuesday's refusal to join the US's conciliatory tone.

Dr Jim Swire, whose daughter Flora was killed in the bombing, said: "I think America's is the voice that really matters in this.

Dr Jim Swire wants Britain to follow America's lead

"I can't understand why the British Government now should be harking back to arguments that have been put out to us over the past six years if America, who is the power in this, is prepared to consider some kind of compromise."

He welcomed the American proposals to try the men under Scottish law in a neutral country, but said he had been unable to get any information from the Foreign Office about the reported developments.