THE murder of WPC Yvonne Fletcher outside the Libyan embassy in London was one of the most shocking police killings of the past 25 years.

Fletcher, 25 and engaged to be married, was gunned down in broad daylight as she helped to police a peaceful protest of Libyan exiles outside the embassy in St James’s Square, London, in 1984.

As she lay dying from a stomach wound, the gunman continued firing his machinegun from one of the embassy’s upstairs windows, injuring a further 10 demonstrators and police. Fletcher died soon afterwards at Westminster hospital. Her fiancé, another police officer who was at the demonstration, was by her side.

For millions the image of her policewoman’s hat, left lying in the road during the subsequent 11-day police siege, was a poignant reminder of the brutality of the regime of Muammar Gadaffi, the Libyan president.

There was further outrage when Margaret Thatcher bowed to Gadaffi’s threats to staff at the British embassy in Tripoli and allowed the 30 Libyan diplomats from the embassy in London to fly home.

Scotland Yard detectives were prevented from interviewing them, making it impossible to identify the killer. Diplomatic ties were severed — only to be renewed in 1999 when Libya grudgingly accepted “general responsibility” for the crime. Gadaffi agreed to pay compensation — believed to be about £250,000 — to Fletcher’s mother, Queenie.

The murder, and Gadaffi’s disregard for the principles of western justice, has left a bitter legacy. The Metropolitan Police Federation said in 2004 that Libya had “blood on its hands” over the officer’s death. It demanded that Tripoli hand over the killer before Tony Blair had talks with Gadaffi in March that year.

It has now emerged that just as her police colleagues were calling for the killer to face justice in the UK, Foreign Office ministers secretly agreed that he should face trial onlyin Libya. The controversial agreement was signed as Tripoli was preparing to grant lucrative contracts to British oil and gas firms.

Abdulati al-Obeidi, Libya’s Europe minister, disclosed that he had signed the deal with Anthony Layden, Britain’s then ambassador to Libya, that the killer should be tried in the country. “I personally signed the agreement with the former ambassador relating to her case,” Obeidi said.

“We agreed politically that if there is anyone accused and found guilty in Libya of Fletcher’s case, we would not be asked to send him to the UK but instead we would try and sentence him here in Libya, where he would also serve his sentence.”

The minister added that, as part of the deal, anyone in the UK found to have participated in an alleged MI6-backed plot to murder Gadaffi would be tried in Britain.

Claims about that plot were first made five years ago by David Shayler, the former MI5 agent.

Layden, who still works at the Foreign Office, confirmed the agreement. He said the Libyan constitution forbade the killer’s trial in the UK and there was no extradition agreement that would have facilitated his transfer to the UK.

The deal was signed in 2006, when trade ties with Libya were beginning to open up. Blair had announced two years before that Britain was resuming business links with Tripoli.

Shell signed a deal for gas exploration worth a potential £400m and BAE Systems was lining up to sign a deal to provide civil aviation facilities. The following year British Gas won three oil contracts.

Queenie Fletcher feels let down by the British government for its failure to help solve the case. Last week she said in a newspaper interview that she had hoped Abdelbaset Ali Mohmed al-Megrahi, the Libyan intelligence agent convicted of the Lockerbie bombing, would be exchanged for her daughter’s killer.

“I felt that if Megrahi was ill, he should be allowed to go home, although to another prison, but I thought it would also have been a good idea to strike a bargain,” she said.

Michael Winner, the film director and the founder and chairman of the Police Memorial Trust, formed to commemorate Fletcher’s murder, said he was unaware of any deal to try the killer in Libya.

“I understand from those close to the event that the building was bugged and they know who did it,” Winner said.

During a heated debate held in the House of Commons a month after the shooting, Leon Brittan, the then home secretary, said that detectives had narrowed down the list of suspects and thought the crime had been committed by “one of two people”.

Commander Bill Hucklesby, former head of the anti-terrorist branch who investigated the shooting, told the inquest into Fletcher’s murder that all 30 people in the embassy at the time remained potential suspects.

Last week a former colleague said he remained disgusted by the way politics had interfered with his inquiry into the murder of a fellow Met officer.

“We were dictated to by Gadaffi and we surrendered,” he has told friends. “As far as them bringing a suspect to trial in Libya is concerned, I don’t see how that trial can take place without due process.”

Contacted at his London home this weekend, Layden sought to defend the agreement. Asked whether he understood that news of the deal would make people in the UK angry, he replied: “I can understand that. But I’m a professional diplomat and this was part of the process.”

A spokesman for Straw said: “It is entirely misleading and simply wrong to suggest that there was a ‘secret deal’ over the treatment of any suspect in relation to the murder of Yvonne Fletcher.

“The two ambassadors exchanged letters which underlined the position as it stood at the time. Prior to 2008, Libyan law did not allow for extradition for trial in other countries. So a trial in Libya was the only outcome that would reflect the UK’s determination to see justice done in this case.”

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