EDINBURGH - In a move that could speed his release, Scotland's high court agreed that a Libyan jailed for the 1988 bombing of a plane over Lockerbie can drop his appeal against conviction.

Abdel Basset al-Megrahi, 57, was convicted in 2001 of plotting the bombing of Pan Am flight 103 which killed all 259 people on board and 11 people on the ground. He was sentenced to a minimum of 27 years, a term he is serving in a Scottish prison where he receives frequent visits from his wife and children.

Lord Arthur Hamilton, Scotland's most senior judge, said he had accepted Megrahi's request to withdraw his appeal but said there were other legal hurdles to be negotiated before the appeal process could be ended.

The court is expected to meet again in three weeks' time to finalize the process, which depends on Scotland's judicial authorities dropping their own appeal against Megrahi's original sentence, which they saw as too lenient.

The former Libyan intelligence agent is suffering from terminal prostate cancer and has made a request to be released on compassionate grounds. His lawyers emphasized that argument on Tuesday, saying he was desperate to return home to die.

He has progressive prostate cancer and this has now reached the terminal stage, lawyer Margaret Scott said.

He is suffering severe pain and he is in great distress.

Britain and Libya have signed a prisoner transfer agreement that could allow Megrahi to be sent back to Libya to serve out the remainder of his sentence.

Scotland's justice secretary, Kenny MacAskill, is in the process of trying to decide what course of action to take -- release Megrahi on compassionate grounds, send him back to Libya under the transfer agreement or leave him in prison.

COMPASSIONATE RELEASE?

Tuesday's court decision opens the way for Megrahi to be sent home, although if it is via the prisoner transfer agreement that can only happen once all appeals processes are terminated, which is likely to take a few weeks' more.

MacAskill has said he will make a decision on Megrahi's fate by the end of next week. Most expectations are that he will be granted compassionate release, a move that is likely to anger the families of victims of the bombing.

The United States opposes Megrahi's release, saying he should serve out his sentence in Scotland, even if he is to die. The Lockerbie bombing killed 189 Americans.

A group of U.S. senators has written to MacAskill calling on him not to let Megrahi go, adding their voices to a chorus of disapproval that includes that of U.S. Secretary of State Hillary Clinton and the families of the American victims.

If Megrahi is released on compassionate grounds, he is likely to be warmly welcomed by Libyan President Muammar Gaddafi, who has gained Western acceptance since dropping his nuclear weapons program in 2003.

The Megrahi case has become a millstone for the Scottish government, forcing it to balance a series of competing interests, among them the fact that British oil companies are trying to do more business in Libya and hope Megrahi's release might open doors.
(Writing by Luke Baker; Editing by Janet Lawrence)

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