TRIPOLI, July 16 (Reuters) - Five Bulgarian nurses and a Palestinian doctor imprisoned in Libya eight years ago and sentenced to die for infecting hundreds of children with HIV may know this week whether they are to go free.

The medics were sentenced to death in December after being convicted of infecting 426 Libyan children with the deadly virus while working at a children's hospital in the city of Benghazi.

The six say they are innocent and were tortured to make them confess. Some Western scientists say negligence and poor hygiene were the real culprits and that the infections started before they arrived at the hospital.

Relatives of the children have said the infections were part of a Western attempt to undermine Muslims and Libya.

Libya's Supreme Court last week upheld the death sentences, placing their fate back in the hands of the government's High Judicial Council, which is controlled by the government and has the power to commute sentences or issue pardons.

With the Council due to meet on Monday, European Union governments are hopeful the six will be set free after hectic negotiations with an association of families.

Both sides have suggested agreement is close, and Libya has hinted it could free the nurses if an accord is reached.

The families have asked for compensation of 10 million euros ($13.3 million) for each infected child's family -- "blood money" under which Islamic law lets victims' relatives withdraw death sentences in return for reparations.

The EU refuses to accept the idea of compensation, which would imply the medics were guilty, but has offered a fund to pay for the children's future care.

Libyan officials say the Council could take several sessions to reach a final decision and will only agree to the release of the nurses if a settlement had been reached in the private talks between the families and the EU.

"The Council will take into consideration several factors like compensation, the age and the time spent by the prisoners in jail," Libyan Foreign Minister Mohammed Abdel-Rahman Shalgam told reporters last week.

Libya emerged from decades of international isolation in 2003 when it scrapped its programme of prohibited weapons and returned to international mainstream politics.

Washington said last week it was sending the first U.S. ambassador to Tripoli in nearly 35 years, but failure to free the medics could carry a heavy diplomatic cost for Libyan leader Muammar Gaddafi.

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