United Nations ? The Libyan government signed an agreement Wednesday setting up a $2.7 billion fund for families of the 270 victims of the 1988 Pan Am bombing — a key step to lifting U.N. sanctions against Libya, according to an e-mail from the families’ lawyers.

The agreement setting up an escrow account at the Bank for International Settlements in Switzerland was reached after an 11-hour session in London, said the e-mail signed by attorneys James P. Kreindler and Steven R. Pounian and read to The Associated Press.

The bank, which is based in Basel, Switzerland, and known as the BIS, confirmed earlier Wednesday it was asked to manage an escrow account “from which claimants will be compensated.” Libya will pay up to $10 million for each victim, lawyers have said.

Under the deal, U.N. diplomats said the Libyan government would start transferring the $2.7 billion into the escrow account immediately and complete the transaction today.

The Libyan government then would send a letter to the Security Council saying it met the conditions for lifting sanctions — by taking responsibility for the bombing, renouncing terrorism and paying compensation to the families, the diplomats said.

The United States and Britain also would send letters to the council saying they believe Libya has met the requirements to have sanctions lifted and Britain would circulate a draft resolution doing so, the diplomats said.

Friday is the target date for sending the letters, circulating the draft resolution and holding a meeting at the State Department with victims’ families, the diplomats said.

The compensation deal calls for Libya to pay each victim’s family $4 million when U.N. sanctions against Libya are lifted, another $4 million when the United States lifts its own sanctions against the country, and $2 million when Libya is removed from the State Department’s list of countries sponsoring terrorism, said Mark Zaid, an attorney representing more than 50 relatives of victims.

Initial $4 million payments will be made to a New York trust account after the Security Council resolution lifting the sanctions is entered, Kreindler and Pounian said in their e-mail to family members.

While the attorneys appeared confident that sanctions would be lifted quickly, U.N. diplomats were not as confident.

That’s because Moammar Gadhafi’s government agreed in 1999 to pay only $33 million to families of the 170 people killed in the 1989 bombing of a French passenger jet over Niger.

The $33 million Libyan payout for the UTA bombing would provide just $194,000 for each of the 170 victims — a point stressed by French diplomats. While Paris is not expecting the same deal the Pan Am victims are getting, U.N. diplomats said France wanted equity for the UTA victims.