Rebels in eastern Libya have captured members of a British special forces team but the issue will be resolved shortly, rebel sources said on Sunday.

The Special Air Service (SAS) unit was on a secret diplomatic mission to make contact with opposition leaders involved in the struggle against Muammar Gaddafi's government, the Sunday Times reported earlier.

The British government declined to comment on the affair. But a Libyan human rights activist with links to the rebels told Reuters that Britain was negotiating to secure their release.

They (the rebel army) did capture some British special forces. They could not ascertain if they were friends or foes. For our safety we are holding them and we expect this situation to be resolved soon, said the rebel source in Benghazi.

They are safe and in good hands. We do not know why they (British government) did not get in touch first or (detail) the purpose of their mission, he told Reuters.

Another rebel source said the group, numbering eight people carrying British diplomatic passports, were arrested about 30 km from Benghazi.

We think this issue will be settled very swiftly, he said.

British Defence Secretary Liam Fox said a British diplomatic team was in Benghazi but he declined to comment on whether special forces had been captured.

I can confirm that a small British diplomatic team is in Benghazi. We are in touch with them, but it would be inappropriate for me to comment further on that for reasons I'm quite sure you understand, Fox told the BBC.

The Geneva-based Human Rights Solidarity group, which employs a number of Libyan exiles, told Reuters a team of eight special forces personnel had been seized by rebels about 10 km (6.25 miles) from Benina airport, which serves Benghazi.

An activist with the group, Jiumma Elomami, said they are under arrest but we have information that the British authorities are now negotiating with the new opposition council to negotiate their release.

He said it was not clear whether British officials had also been arrested alongside the troops, whose regiment has seen service in Iraq and Afghanistan and has a special place in British military folklore.

Earlier, rebel sources expressed puzzlement about the mission.

If this is an official delegation, why come with helicopters? Why not say 'we are coming, permission to land at the airport?' There are rules for these things, one said.

The Sunday Times said the team were intercepted as they escorted a junior diplomat through rebel-held territory. He was preparing the way for a visit by a senior colleague to try to establish diplomatic contact with the rebels, it said.

Britain has taken a strong stance against Gaddafi and wants to work with rebel groups to help oust him from power. But Gaddafi's opponents fear he could use any evidence of Western military intervention to rally support.

It is a very difficult situation. There are a number of different opposition groups to Colonel Gaddafi in Libya. They do seem relatively disparate, Fox said.

We want to clearly understand what the dynamic is there because we want to be able to work with them to ensure the demise of the Gaddafi regime, to see a transition to greater stability in Libya and ultimately to more representative government, he said.

Fox ruled out the use of British military ground forces in Libya but said a no-fly zone remained a possibility. NATO defence ministers meeting in Brussels on March 10-11 would examine no-fly zone options.

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