Britain says it has signed a deal on judicial cooperation with Libya, but it would not immediately lead to convicted Lockerbie bomber Abdel-Basset al-Megrahi being sent home to Libya to finish his sentence.

Prime Minister Tony Blair's office denied that Megrahi, serving life in Scotland for murdering 270 people with the bomb that blew up Pan Am Flight 103 over the Scottish town of Lockerbie on December 21, 1988, would be going home.

"Wrong. Not true," Blair's spokesman told reporters at the G8 summit in Germany.

"Separately, we are discussing a memorandum of understanding with Libya but that would not affect this case," he added.

After a tortuous legal and diplomatic process, Megrahi was handed over, convicted and sentenced to life in January 2001 by a Scottish court sitting in the Netherlands. He is serving his sentence in Glasgow's Barlinnie prison.

Scottish Premier Alex Salmond said a memorandum was signed on May 29, and he told the Scottish Executive on Thursday it covered judicial cooperation on matters of law, extradition and prisoner transfer.

He said Megrahi's case was under review by the Scottish Criminal Cases Review Commission which might result in it going back to appeal, but he insisted that the memorandum of understanding had no bearing on that process.

A Foreign Office spokesman confirmed that the memorandum had been signed as part of the process of normalization of ties with former pariah Libya that had been under way since it renounced weapons of mass destruction in December 2003.

He said it did not mention Megrahi by name but said that because it would eventually cover issues such as Libyan prisoners in Britain his case could come up at some stage.