(Adds EU comment on compensation in paragraph 14)

By Salah Sarrar

TRIPOLI, June 20 (Reuters) - Libya's Supreme Court will rule in July on an appeal by six foreign medics sentenced to death for infecting Libyan children with HIV in a trial that has affected Tripoli's ties with the West.

"The case is reserved for a verdict on July 11," the judge, Fathi Dhan, told the court on Wednesday.

The five Bulgarian nurses and a Palestinian doctor were convicted in December of deliberately infecting 426 children with HIV in a highly politicised trial that have slowed attempts by OPEC-member Libya to end its long international isolation.

Separately, Driss Lagha, chairman of the Association for the Families of the HIV-infected Children, said a deal on financial compensation might be wrapped up in the next few days in talks between the European Union (EU) and the families.

"We might reach a settlement on financial compensation in a week -- even before the next court session," he told Reuters, referring to longstanding demands by the families for financial compensation, which could set the stage for the medics' release.

Lagha added that any deal agreed in coming days would not affect the court's decision on July 11.

The medics, who have been in jail since 1999, appealed to the Supreme Court saying they are innocent and were tortured into confessing. The United States and the European Union have stepped up pressure on Tripoli to release them.

"I ask you, the just court, to restore freedom to these women who have been deprived of it for eight years," Bulgarian lawyer Plamen Yalnazov told the court, which heard arguments from both defence and prosecution lawyers.

The Supreme Court is widely expected to confirm the death sentences, a move that would leave the fate of the medics in the hands of Libya's High Judicial Council, a government-led body which has the power to commute sentences.

"NO EU COMPENSATION"

Political analysts say the council would be likely to let the nurses return to Bulgaria if a deal to compensate the families of the HIV-infected children can be reached.

Bulgaria said on Tuesday it had granted citizenship to the Palestinian doctor, Ashraf Alhajouj, a decision that could help bring him out of Libya if the verdicts are eventually commuted under a possible compensation deal.

The five nurses, Nasya Nenova, Snezhana Dimitrova, Valentina Siropolu, Christiana Valcheva and Valia Cherveniashka, worked along with Alhajouj at a hospital in Libya's second city of Benghazi where the injections occurred in the late 1990s.

Talks between the European Union and the association of families resumed last month. The association wants around 10 million euros (almost $14 million) for each family.

"We are never going to pay compensation that's clear. For us it is a package that ensures the long-term medical care of the children plus long-term assistance to the Benghazi Centre for Infectious Diseases," European Commission spokeswoman Christiane Hohmann said in Brussels.

Sofia has also refused to pay, saying it would be an admission of guilt. But it has set up a solidarity fund along with the European Union and the United States to provide medical aid and financial support to the children and their relatives. (Additional reporting by David Brunnstrom in Brussels)

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