A negotiating mandate proposed by the European Commission includes provision for a free trade agreement and cooperation in areas including energy, control of illegal migration, transport, education, environment and culture, a Commission statement said.

"This is a historic decision. Libya is an important player in the Mediterranean region and in Africa, and so far has no framework for relations with the EU," EU External Relations Commissioner Benita Ferrero-Waldner said in the statement.

"I am confident that the agreement will create solid and long lasting relations between Libya and the EU," she said.

Trade Commissioner Peter Mandelson said the EU aimed for an "ambitious" free trade agreement with Libya.

"Together with our support for Libya's bid to join the World Trade Organisation, these negotiations represent a vital first push forward in Libya's re-integration into the world trading system," he said in the statement.

A mandate for the Commission to negotiate with Libya on behalf of the bloc has to be approved by the EU's 27 member states.

EU ties with Libya were stalled for years over charges that the Libyan government supported terrorism. But Brussels announced in July it would boost relations after Tripoli freed Bulgarian medics accused of infecting Libyan children with HIV.

In the deal struck to secure the liberation of the medics, the EU held out the prospect of increased market access for Libya in fisheries and agricultural products, as well as cooperation on migration and tourism.

Europe takes the bulk of Libya's oil exports and European firms are keen to expand energy investment there. The EU also wants Libya to help in sea patrols aimed at stemming a flood of illegal migrants from Africa.

EU officials have said it is unclear whether the EU talks would take place under the auspices of the EU's so-called Barcelona process, which Libya has appeared reluctant to embrace given requirements for political and economic liberalisation.

The EU statement said the Commission would aim to "establish fruitful dialogue and cooperation" on political issues "including important subjects such as international security, development and human rights".

The return of the medics to Bulgaria ended what critics called a human rights scandal and allowed long-isolated Libya to complete a process of normalising ties with the West.