The United States and European Union have made it clear that their future relations with Moammar Gadhafi depend upon the outcome of the case, but the Libyan leader faces high emotions at home, where relatives of the infected children angrily protested Sunday's decision in Tripoli. Some set fire to tires and clashed with police. Four demonstrators were arrested.
The Libyan government issued no immediate statement on the court ruling. In Washington, State Department spokesman Justin Higgins said "our understanding is that this decision is a positive development since it removes the risk of the death sentence being carried out." The nurses and doctor are widely expected to receive lighter sentences in a retrial ordered by the supreme court.
Its ruling came three days after U.S., European and Libyan negotiators reached a deal to set up a fund to help families of the 426 children infected with HIV in the 1990s. About 50 of the children have died, according to a lawyer for the families.
The United States and European Union had accused Libya of trumping up the charges to divert attention from poor hygiene at its hospitals. The court's chief judge Sunday described "irregularities" in the case.
Gadhafi is eager to improve ties with the West and was believed to be looking for a face-saving way out.
The health workers were accused of deliberately infecting the children at a Benghazi hospital as part of an experiment. The workers said they were tortured to extract confessions.
In the ruling Sunday, the supreme court's chief judge, Ali al-Alous, said prosecutors had agreed with defense lawyers that there were "irregularities" in the arrests and interrogations of the medical workers.
Bulgaria welcomed the verdict as a "positive sign" and said it hoped for a quick retrial.
"The Libyan court's decision is an encouraging step toward a final recognition of the innocence of our compatriots," said Bulgaria's parliament speaker, Georgi Pirinski.
The defendants did not attend Sunday's session. A date for the retrial was not immediately set.
In 2003, Libya agreed to compensate families of the 270 victims of the 1988 bombing of a Pan Am jetliner over Lockerbie, Scotland. It also scrapped its nuclear program, handing its material over to the U.S. and U.N.
In response, the U.S. lifted 23-year-old travel restrictions, invited American companies to return to the oil-rich nation and encouraged Tripoli to open a diplomatic office in Washington.
But Washington has made clear the nurses' case is a key sticking point that must be resolved before a U.S. embassy reopens in Tripoli, a top goal for the Libyan leader.
"There should be no confusion in the Libyan government's mind that those nurses ought to be not only spared ... but out of prison," President George W. Bush said in October.
The European Union also said its relations with Libya hinged on the fate of the Bulgarians.
Meanwhile, the families of the infected children have demonstrated at every court session and decried repeated delays in carrying out the original sentence of execution by firing squad.
Relatives, some of them carrying their children, scuffled with riot police surrounding the court during Sunday's session and tried to force their way inside.
Awad al-Mesmari, a lawyer for families of the infected children, said he was "saddened" by the ruling. Another lawyer for families vowed the six health workers would still be found guilty.
In months of negotiations, Bulgaria rejected Libyan proposals that it compensate the families of the infected children, saying that would imply the workers' guilt and amount to blackmail.
On Thursday, an agreement was announced in which Bulgaria, the U.S., Britain and the EU agreed to set up a non-governmental group to collect and distribute aid to the children's families. The amount has yet to be announced.