Interim prime minister Abdel Rahim al-Kib has promised a "fair trial" for Saif, slain leader Mummar Gaddafi’s son and one-time successor.

His capture by former rebel fighters in south Libya early on Saturday spelt "the end of the political influence of the Gaddafi clan and the psychological fear" they exerted over Libyans, said international law and Libya expert Saad Djebbar.

But he said "the greatest danger now is of division between the forces which toppled the father Gaddafi," after the months-long hunt for Saif that had served to unite disparate military and political groups.

"The problem is he's being held by one militia," said Fred Abrahams of Human Rights Watch, referring to the former rebels who captured Saif and transferred him to their hometown of Zintan, southwest of Tripoli.

"I'm afraid that they hold him for political positioning. They're trying to form the government and the militias might use him as a tool for their political positioning," he said.

"And that could cause more tensions between factions and Libya's attempt to create a new state based on human rights."

A new interim government is to be announced by Monday "at the latest," an official of the ruling National Transitional Council (NTC) said just hours before Saif's arrest was announced on Saturday.

Kib has said the new government will be formed of technocrats but he has come under pressure from Libya's tribes and numerous armed factions which are demanding a stake.

The handling of Saif's case is "definitely a test after the way his father and brother were killed. Now this is a test that they can deal with him according to the law, not according to the street," according to Abrahams.

The brutal end of Gaddafi and another son Mutassim, both killed after being captured last month, has increased concern in the international community over the fate of Saif.

But Ahmed Jibril, an adviser to the NTC, plays down the risks of a rift over Saif, who is wanted by the International Criminal Court for alleged crimes against humanity in fighting the anti-Gaddafi revolt.

"Differences between factions [are] only natural… healthy even," he said, insisting that all sides recognised the authority of the NTC which world leaders are urging to ensure that justice is done in putting Saif on trial.

Djebbar said the legal complexities of a trial inside Libya, where the death penalty is an option unlike in cases tried by the ICC, could have a damaging impact on the country's transition.

"The Libyans must now build a modern state, and there are other priorities," he said, pointing to security, the disarming of militias and founding of a national army as well as post-war reconstruction.

Besides, the international law expert said, "public opinion is inflamed and there's no culture of a justice system" in Libya after four decades of rule under the autocratic Gaddafi.

"The challenges are very high. There is so much anger and the justice institutions in Libya are not functioning today," agreed Abrahams of the HRW.

"I'm deeply worried that they can't do it," to ensure a fair trial inside Libya, he said. "Our position is that he has to be transferred to The Hague and then the Libyan authorities can ask for his transfer" back to the country.