The UK Government has ruled out using frozen Libyan assets to compensate IRA victims, who were injured by weapons and Semtex supplied by the Gaddafi regime.
Calls for the publication of a report looking at victim compensation options completed last year were also rejected. The author of the report, William Shawcross, was summoned to appear before the Northern Ireland Affairs Committee on Wednesday.
The Gaddafi regime supplied the IRA with large quantities of weapons, while Semtex explosives were used in numerous murders, such as the Enniskillen Remembrance Day bombing in 1987 and the 1996 attack in London's Docklands.
In a written statement to Parliament on Tuesday, Middle East and North Africa Affairs Minister James Cleverley said the "internal assessment report" was mandated to advise ministers and benefit from "private and confidential conversations."
He stressed that the report would not be published, but clarified some of its findings, including reasons why the government could not "legally use Libyan assets frozen in the UK to provide compensation to victims."
"The UK government may not confiscate frozen assets," Cleverley said, he also ruled out using public funds to pay compensation to victims and then recover funds from the Libyan government.
He said it was the responsibility of the Libyan state to provide compensation and that the government had urged Libyan authorities at "the highest level" to deal with UK victims.
Adding that there are "practical difficulties in obtaining compensation from Libya because of the ongoing political and economic instability."
He suggested victims should avail of the current injury compensation schemes in the UK and he also pointed to the Troubles victims pension, which may provide another avenue for compensation.
DUP deputy leader Nigel Dodds accused the government of "behaving disgracefully" and letting down victims of IRA terrorism.
"In 2004, Libya agreed to pay $1m compensation to the families of each of the 170 people killed in the bombing of UTA flight 772 in 1989," he said.
Adding, "the German government secured $35m for those killed in the 1986 bombing of the La Belle discotheque in Berlin."
"After all these years, our citizens have received little more than warm words and sympathy. This should be a point of embarrassment for the government. We will be challenging the government further on this matter in Parliament."