US citizens are now able to sue Saudi Arabia for compensation over the 11 September 2001 terrorist attacks after an appeals court in New York ruled that victims and their families would be able to seek liability from the Middle Eastern state.

Following the 9/11 attacks, a number of victims and their families tried to sue Saudi Arabia after claiming the region aided al-Qaeda, led by Osama Bin Laden at the time, and therefore should be entitled to compensation.

The plaintiffs suing Saudi Arabia include family members of John O'Neill, a former federal counter-terrorism agent who had led investigations of Bin Laden and was working as the chief of security for New York's World Trade Center when the attacks occurred.

The appeals court said that previously a lower-court judge "rested on an error of law" in rejecting a request to reopen the cases against the country's government and an affiliated charity.

The Kingdom of Saudi Arabia and the Saudi High Commission for Relief of Bosnia and Herzegovina had previously won a ruling on the grounds that a foreign government is immune from suit.

However the appeals court said on 19 December that the same court had made inconsistent rulings on whether the terrorism claims propounded in the case fall under sovereign-immunity rule.

"We conclude that the circumstances of this case are extraordinary," said the three-judge panel.

In a 2009 cable obtained by whistleblower group Wikileaks, the then-Secretary of State Hillary Clinton said Saudi Arabia was reluctant to stem the flow of money to a number of militant Islamic groups.

Saudi Arabia is the world's biggest source of funds for Islamic terrorist groups such as the Taliban in Afghanistan and Pakistan's Lashkar-e-Taiba.

The 2009 cable added that Saudi Arabia is the most "significant source of funding to Sunni terrorist groups worldwide."

The plaintiffs' lawyer Jerry S. Goldman said in a statement that "this is a big step forward in the process of obtaining fair justice for the victims of this tragedy."

"[The decision is] soundly grounded and restores this case to the proper procedural posture."

The case is In Re Terrorist Attacks on September 11, 2001, 12-1318, U.S. Court of Appeals, Second Circuit (Manhattan).