A victims' campaigner has claimed the British government reached a secret deal with Libya years ago which is blocking compensation for those injured in IRA attacks.
MPs are looking at attacks sponsored by Colonel Muammar Gaddafi's regime in the north African country.
Gaddafi, who died in 2011, was the IRA's main arms supplier during the Troubles.
Libyan-supplied Semtex was used in high-profile attacks including the Enniskillen bombing in 1987.
Kenny Donaldson, from South East Fermanagh Foundation (SEFF), told the Northern Ireland Affairs committee yesterday that a secret deal had been reached.
He said that during an interview with an Arabic media outlet on Wednesday, a senior Libyan banking official who worked under the Gaddafi regime insisted that the UK government reached a "diplomatic agreement" with the Libyan government at the time.
"Paraphrasing him (the agreement) was a quid pro quo for issues concerning the provision of Semtex and other armaments and of the UK's role in attacks upon Libya," Mr Donaldson said.
Mr Donaldson thought the deal may relate to US air strikes on Libya in 1986, some of which were launched from UK bases.
He added: "There is a reason why this (compensation for victims of IRA attacks) is not being pursued."
Last month, the British government ruled out using frozen Libyan assets to compensate IRA victims injured by Libyan-supplied weapons and Semtex.
The committee heard from several witnesses yesterday, including Jonathan Ganesh, who was injured in the IRA's London Docklands bombing in 1996.
He said the British government had put trade links with Libya ahead of securing damages for victims.
"Our government has disgraced victims," he told MPs. "They fought for trade deals more than they fought for victims."
The United States, Germany and France have obtained compensation payments from Libya.
Speaking after yesterday's hearing, Ulster Unionist peer Lord Empey said he believed that Tony Blair's government had struck a deal with Colonel Gaddafi.
"Why else would the UK be the principal victim of Libyan Semtex yet be the only country not to seek compensation?" he said.
"Germany, France and the United States all secured compensation for their citizens, yet the United Kingdom - whose citizens took the brunt of the violence - neither asked for nor received anything."
Lord Empey said the British government must begin compensating victims.
"With an income stream coming from tax revenues on frozen Libyan assets held in London, the government has no excuse for further delay in starting a compensation process," he said.
"Any monies used now in advance of a final deal with Libya should be recovered later.
"For a deal to be done, London must be prepared to use its veto at the UN Security Council and prevent a release of frozen assets unless an accommodation can be reached."
