Libya has signed and ratified the prisoner transfer agreement with the UK that could see the man convicted of the Lockerbie bombing returning to Tripoli.

Abdelbaset Ali Mohmed al Megrahi, the Libyan serving 27 years in HMP Greenock for the bombing that killed 270 people in December 1988, can now make an application to return home.

In order to apply for a transfer he would have to drop his appeal against conviction, which entered its second day yesterday.

In a tacit acknowledgement that Megrahi is likely to be allowed to return home, the Crown Office wrote to all relatives of the victims two weeks ago explaining the transfer process.

Earlier this year, The Herald revealed that Libyan officials had been encouraged by senior civil servants from both sides of the border, including Robert Gordon, the head of the Justice Department in Scotland, to apply for Megrahi to be transferred as soon as the agreement was ratified.

Megrahi, whose case was referred back for a fresh appeal in June 2007 because it "may be a miscarriage of justice", is suffering from terminal prostate cancer and relatives and campaigners are concerned that he will not survive the appeal, which is expected to last at least 12 months - partly because the court will be sitting for only four days a week on alternate months.

His request for interim bail was last year turned down by three appeal court judges.

The e-mail from the Crown coincided with the publication of a critical report on the transfer agreement by the Joint Committee on Human Rights at Westminster.

Mr Straw wrote to the committee in March to say he would delay ratification only until the Easter recess because "a delay beyond early April is likely to lead to serious questions on the part of Libya in regards to our willingness to conclude this and three other judicial co-operation agreements".

The decision on Megrahi's transfer would ultimately rest with the Scottish Government and there have been indications in recent months that governments on both sides of the border are preparing for the transfer.

A Ministry of Justice spokeswoman said: "The prisoner transfer agreement between the UK and Libya was laid before Parliament on January 27. The Instruments of Ratification have been exchanged and the agreement is now in force.

"In the case of prisoners in Scottish jails, including Megrahi, and respecting the devolution settlement, any decision to transfer under this agreement would be for Scottish ministers and Scottish ministers alone."

The transfer deal was one of four co-operation agreements signed by the director of legal affairs at the Libyan Foreign Ministry and the British ambassador to Tripoli.

"These agreements open the way for ... judicial authorities in both countries to co-operate in the field of exchange of wanted suspects, transfer of prisoners, and carrying out judicial decisions," said the official.