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A special Iraqi court will try Saddam Hussein in absentia for crimes against humanity, if the fugitive dictator is not caught or killed, and bring key members of his regime before the tribunal, officials said on Wednesday.

Officials from the Iraqi Governing Council told a news conference U.S. officials had agreed to hand over top Saddam loyalists in detention to face trial by an Iraqi tribunal formally established on Wednesday.

U.S. soldiers from a mine sweeping team check their equipment near Ramadi, Iraq, Dec.10, 2003.  [Reuters]

"Saddam Hussein will be accused and charged with committing crimes against humanity and the Iraqi people. He will certainly come under the jurisdiction of this court," said Ahmad Chalabi, a senior member on the U.S.-backed Governing Council.

American officials hope prosecuting Saddam's top lieutenants will bolster support for the Governing Council and convince Iraqis the old regime will not return.

Efforts to rebuild the country have been thwarted in part by an insurgency the U.S. military blames on Saddam loyalists and foreign fighters. Two more U.S. soldiers were killed in northern Iraq on Wednesday.

U.S. forces arrested 41 people in Iraq on Wednesday including several believed to be responsible for an attack that killed seven Spanish intelligence officers last month, Spanish Defense Minister Federico Trillo said.

The arrests in Latifiya, about 20 miles south of Baghdad, were carried out with intelligence from U.S., British and Spanish forces and the help of Iraqi police.

Spain, which has 1,300 troops in Iraq, suffered its first major combat casualties on November 29 when eight intelligence agents in two cars came under fire from guerrillas in Latifiya. One agent survived.

The U.S. Congress has earmarked $18.6 billion for Iraqi reconstruction but an international dispute erupted on Wednesday over distribution of that money after U.S. Deputy Defense Secretary Paul Wolfowitz said contracts would only go to firms from countries that supported Washington in the war.

A list of eligible nations included countries from Afghanistan to Uzbekistan, but excluded Russia, France and Germany, which opposed the U.S.-led war.

Paris, Berlin and Moscow reacted angrily to the decision and the European Commission said it was investigating whether it meets world trade rules.

"The interests of a political settlement of the situation in Iraq and the rebuilding of Iraq are best served by uniting the efforts of the international community, and not splitting it," Russian Foreign Minister Igor Ivanov said, visiting Berlin.

Washington defended its decision as "totally appropriate."

BRUTAL REGIME

Few regimes in the late 20th century were as brutal as Saddam's. Since his ouster in April, officials have announced the discovery of 260 suspected mass graves across the country, which they have said could contain up to 300,000 bodies.

Of the 55 Iraqis on a U.S. most-wanted list, 38 have been captured and two killed. Officials say trials would begin next year with the prosecution of some of the 38 in custody.

"We agreed that those who have been accused and detained would be handed over to this historic court," Abdel Aziz al-Hakim told a news conference. He called the creation of a tribunal to try crimes against humanity and genocide a "great achievement for the Governing Council in Iraq."

The announcement the Iraqi court would seek to account for Saddam's murderous rule came as guerrillas killed two U.S. soldiers in twin attacks in the northern city of Mosul.

One U.S. soldier from the 101st Airborne Division was killed in a drive-by shooting and another died when a roadside bomb was detonated beside a convoy.

Residents said after each incident U.S. troops opened fire and civilians were caught in the crossfire. A Kurdish peshmerga fighter was killed after the drive-by shooting, and after the bomb attack troops killed one Iraqi and wounded two.

Since the start of the war to topple Saddam, 310 U.S. soldiers have been killed in action, 195 of them in guerrilla attacks since major combat was declared over on May 1. In the past four days, guerrillas have killed four soldiers in Mosul.

Violence in Iraq has driven out most international aid agencies. U.N. Secretary-General Kofi Annan said on Wednesday Iraq was still too dangerous for U.N. international staff and they would operate from Cyprus instead.

Despite pressure from the United States and others to return to Iraq, Annan said in a 26-page report to the Security Council U.N. staff would make only periodic trips to Iraq and aid would get in through "cross-border" operations.

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