An Ulster Unionist peer has said he was left horrified after hearing evidence from former foreign secretary Jack Straw, which he said suggested the victims of Libya-sponsored IRA terrorism "were expendable".
The former Labour minister told Westminster's Northern Ireland Affairs Committee that British negotiators with Libya decided they were unlikely to succeed in a bid for compensation for Colonel Gaddafi's support for IRA terrorism.
The dictator's regime would have insisted republican atrocities like the Old Bailey bombing were not their direct responsibility, Mr Straw added.
Victims of IRA attacks using Libyan Semtex are pressing for UK government support in their campaign for compensation from massive amounts of frozen assets seized from the toppled administration.
Mr Straw said the north Africans had accepted culpability for the Lockerbie plane bombing and the fatal shooting of WPC Yvonne Fletcher outside the Libyan embassy in 1984.
He said: "They were directly responsible for those acts of terrorism. If you went to a British court on this issue and sought to argue liability for those two sets of matters and liability in respect of PIRA terrorism, you would have greater difficulty if the Libyans were to resist, as I suspect they would, in showing that there was a clear chain of causation between the supply of terrorism and the actual injuries and deaths which resulted.
"That was the difficulty, that was what the Libyans were resisting, and that is why a judgment had been made, an overall judgment had been made that we were not going to get very far pursuing that."
While the US, France and Germany negotiated multimillion-pound settlements with Muammar Gaddafi for its citizens impacted by Libyan-directed terrorism, the previous Labour government in the UK has been heavily criticised for not striking a similar deal.
Mr Straw - who served as Foreign Secretary from 2001 to 2006 and helped secure a 2003 deal for Gaddafi to give up his weapons of mass destruction programmes - told the committee: "Although they admitted they had supplied the Semtex, there was no parallel acceptance of responsibility, and still less an acceptance by them of the case for compensation for those victims."
Speaking afterwards, Ulster Unionist peer Lord Empey said: "I was horrified at the lack of priority given to the interests of the victims of Gadaffi sponsored terrorism in the UK.
"Jack Straw re-enforced the feeling among victims that they were expendable. To argue that as many victims already had received UK compensation their cases were less of a priority was outrageous.
"Mr Straw failed to note that the compensation they were paid came from UK taxpayers. Gaddafi got away with it. Boat loads of weapons were sent by him and these weapons gave the IRA tremendous leverage."
Kate Hoey, a Belfast-born Labour backbencher, asked why the deaths of 3,500 victims of Libyan Semtex were deemed less important to the government.
Mr Straw said that was an outrageous suggestion.
Mr Straw said compensation for IRA terrorism was never raised with him.
He said: "Negotiators were trying to remove a serious palpable threat from Libya. Our focus was on getting the Libyans to admit to these holdings, to get inspectors in and have all the chemical weapons and nuclear facilities dismantled and made safe. Had we refused an agreement on the weapons of mass destruction agenda with the Libyans, all that would have happened is it would not have helped the victims of IRA bombings for a second, not remotely, it simply would have meant that Libya continued to be dangerous."
Lord Empey has introduced a Bill in the Lords due to go through its committee stage next month. It is designed to free up some of the £9.5bn of Gaddafi frozen assets in London for the benefit of victims of Libyan sponsored terrorism.