The International Criminal Court's chief prosecutor conceded on Tuesday that the captured son of Muammar Gaddafi may be tried in Libya rather than in The Hague, meaning he faces the death penalty if convicted.

While ICC prosecutor Luis Moreno-Ocampo met officials in Tripoli, the National Transitional Council (NTC) prepared to unveil a new government line-up that would have to reconcile regional and ideological interests whose rivalry threatens to upset the country's fragile stability.

Three months after Muammar Gaddafi's control over Libya was ended and a month after the former leader was killed on a roadside near his hometown, Libya is struggling to build new institutions out of the wreckage of his 42-year rule.

The Hague-based ICC has indicted Gaddafi's son, Saif al-Islam, for crimes against humanity. But Moreno-Ocampo said Saif al-Islam, who was captured on Saturday, could be tried inside Libya as long as the trial complies with ICC standards.

Saif is captured so we are here to ensure cooperation. Now in May, we requested an arrest warrant because Libyans could not do justice in Libya. Now as Libyans are decided to do justice, they could do justice and we'll help them to do it, so that is the system, he told reporters on his arrival in Tripoli.

Our International Criminal Court acts when the national system cannot act. They have decided to do it and that is why we are here to learn and to understand what they are doing and to cooperate.

Libyan officials have promised a fair trial but the country still has the death penalty on its books, whereas the severest punishment the ICC can impose is life imprisonment.

The law says the primacy is for the national system. If they prosecute the case here, we will discuss with them how to inform the judges and they can do it. But our judges have to be involved, said Moreno-Ocampo.

Saif al-Islam was captured in an ambush deep in the Sahara desert and is now being held in the town of Zintan, in the Western Mountains region where his captors are based.

An NTC spokesman in Tripoli had described the arrest of Saif al-Islam, the last of Muammar Gaddafi's offspring whose whereabouts had been unaccounted for, as the last chapter in the Libyan drama.

An official in Zintan told Reuters steps were already underway for Saif al-Islam's prosecution. A Libyan prosecutor met with Saif (on Monday) to conduct a preliminary investigation, said Ahmed Ammar.

REGIONAL RIVALRIES

His arrest, while celebrated by people shooting their weapons into the air around the country, has exposed the tensions between regional clans.

The fighters from Zintan who seized him Saif al-Islam flew him in a cargo plane to their hometown instead of taking him to Tripoli. They are holding him in Zintan until the central government is formed.

The NTC said prime minister designate Abdurrahim El-Keib would be announcing the cabinet line-up at about 5 pm (1500 GMT) on Tuesday.

Forming the government -- which will run the country until elections are held -- is tricky because it could inflame regional rivalries if any of the competing groups feel their candidates have been excluded.

Earlier on Tuesday, an NTC source told Reuters the council had decided to appoint as the new defence minister the commander from Zintan whose forces captured Saif al-Islam.

Osama Al-Juwali, head of the military council in Zintan, was given the defence job as part of a cabinet line-up in which secularist liberals were dominant and which had no key roles for the Islamists who have been making a bid for power since Gaddafi's fall.

In other appointments, Libya's deputy envoy to the United Nations was named as foreign minister, an oil company executive was made oil minister and the finance minister in the outgoing government was re-appointed, the source said.

However, in an indication of the tensions around the cabinet composition, the source later said some NTC members, after agreeing the appointments, had re-opened the discussions.

There are some people who do not accept some of the names, said the source, who spoke on condition of anonymity. It was not clear which posts were the subject of debate.

MOUNTAIN POWERBASE

Juwali is a former officer in the Libyan military whose forces from Zintan played a crucial role in the offensive on Tripoli which ended Gaddafi's rule in August. He had not previously been seen as a contender for the defence job.

But he appeared to have staked a claim to the post after forces under his command captured Saif al-Islam, who had been on the run for months.

The defence minister's role had been coveted by Islamists, who assumed powerful roles in the chaos following Gaddafi's fall after being persecuted for years.

The source said the NTC had agreed to appoint Ibrahim Dabbashi, the deputy U.N. envoy, as foreign minister. He came to prominence soon after Libya's revolt erupted in February, when he broke with Gaddafi and sided with the rebellion.

Ali Tarhouni, an academic in the United States who returned from exile to run the oil and finance portfolio in the anti-Gaddafi rebellion, was made finance minister, the source said, while Hassan Ziglam, an executive in a Libyan oil company, was given the oil minister's portfolio.

Many of the most powerful players in post-Gaddafi Libya have opted to stay out of the government, preferring instead to focus on winning office when elections are held. These should take place within eight months, according to a timetable the NTC has set itself.

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