By Rachel Conner

THE UK Government is refusing to release more than £700m of Libyan cash believed to be being held in the North-East because of concerns over potential legal challenges from the Gadaffi regime, The Northern Echo understands.

It is understood that the Government is worried that releasing the money, which was frozen following a UN resolution, to Libyan rebels could result in legal action by Colonel Gadaffi.

Dr Matthew Saul, lecturer in law at Durham University, said: “The UK is not required or permitted to redistribute these assets.

“To pass the Libyan assets on would therefore raise issues of UK domestic law and the international law of state immunity.

“The resolution does not authorise the assets to be passed on to the rebels, but it does indicate that the (UN Security) Council might be willing to consider such an authorisation in a future resolution.”

Last month, rebels called for the Government to release 1.4 billion dinar, which was printed by De La Rue at a factory in Gateshead, to help fund the campaign against Col Gadaffi. Libyanborn Dr Salem Burwaiss, whose brother Omran is a solicitor and senior advisor to the National Transitional Council (NTC), now lives in Bishop Auckland and supports the release of the cash.

He said: “I can understand there are complexities in releasing the money, but it is urgently needed for the Libyan people, for basic needs like food, medication and water. The money belongs to the Libyan people.

“The British Government needs to reverse the decision, or find another solution in order to use the money.”

In an open letter published last month, Dr Ali Tarhuni, the NTC’s minister for finance and oil in Benghazi, wrote: “It goes without saying that the consequences of running out of ready money are potentially catastrophic. The neatest short-term solution to this crisis is for the UK Government to release the 1.4 billion dinars printed by De La Rue and currently sitting in Britain.”

UK officials prevented the money from leaving the country in March following a UN resolution which created an obligation for the Government to freeze all Libyan assets.

The resolution, which was passed in February following the Libyan uprising, expresses its intention to ensure the frozen assets will at a later stage be made available to and for the benefit of the Libyan people.

The Foreign and Commonwealth Office has said it is aware of the NTC’s concerns and had been pushing the international community to help resolve the financial situation.

A spokeswoman said recently: “Regarding the unfreezing of assets, there are a range of complicated legal issues and the situation in each country is different.

We are considering what would be possible in a British context.”