CAIRO, December 3 (IslamOnline & News Agencies) - Egyptian justice on Tuesday, December 3, freed U.S.-Egyptian rights activist Saad Eddin Ibrahim after quashing his seven-year sentence and ordering a retrial next month, a decision immediately hailed by the United States.

"I'm happy I'm free," Ibrahim told Agence France-Presse (AFP), speaking on a mobile phone from outside Tora jail, south of Cairo.

"I did not expect things to go so fast; I thank Egyptian justice."

Earlier Tuesday, the Court of Cassation quashed jail sentences handed down in July 2002 to Ibrahim and three co-defendants by the High State Security Court, and ordered a retrial from January 7.

The 64 year-old sociology professor at the American University in Cairo and director of the Ibn Khaldun Center for Development Studies is accused of tarnishing Egypt's image abroad and misappropriating funds.

"The Court of Cassation has accepted the appeal and decided to open a new trial from January 7," its president, Fathi Khalifa, told the audience in Ibrahim's absence.

Khalifa also ordered a retrial for three of Ibrahim's co-defendants, a policeman and two employees of the Ibn Khaldun center, who had been sentenced to up to three years in jail.

Ibrahim will now ask permission to receive medical treatment abroad for back ache and hypertension, his lawyer Mohamed Eid told AFP.

Eid said the three co-defendants would also be released.

The three are policeman Mohamed Hassanein Amara, charged with helping Ibrahim in his campaigns, and two female employees of the Ibn Khaldun Center, Majida al-Beih and Nadia Abdel Nur.

Amara and Beih were sentenced to three years imprisonment in July and Abdel Nur to two years.

The guilty verdict had sparked protests from European countries and the United States, with Washington saying in August that U.S. President George W. Bush would oppose additional financial aid to Egypt.

U.S. Ambassador to Egypt David Welch hailed the latest ruling, saying he hoped "judicial proceedings will conclude expeditiously.

"Given Dr Ibrahim's increasingly fragile health, we welcome this development and hope that he can now receive the specialized medical care he needs," Welch added.

The Egyptian Organization for Human Rights also expressed "great satisfaction" at the ruling.

On Monday, December 2, Amnesty International called for Ibrahim's release, saying the charges for which he and his colleagues were convicted were "a pretext to punish them for criticizing government policies."

Before being sentenced, Ibrahim had served more than 10 months in prison.

He was arrested on June 30, 2000 but released on bail the following August 10.

He was jailed following an initial trial on May 21, 2001 by a different chamber of the High State Security Court, but freed on February 7, 2002 when the Court of Cassation ordered a retrial.

According to AFP, the U.S. decision to halt new assistance over Ibrahim's case does not affect existing aid to Egypt, but prevents Cairo from receiving a 130-million-dollar package sought to alleviate losses in tourism revenue after the September 11 attacks on the United States.

Egyptian Foreign Minister Ahmed Maher had reacted to the aid curb by bluntly telling Washington to stay out of Egypt's internal affairs.

Egypt, a moderating influence in the Middle East conflict, receives about two billion dollars a year in U.S. military and civilian aid, the second largest aid package granted to any country after Israel.

In the second trial, Ibrahim was convicted of charges that included receiving funds from Israel's Haifa University, NATO, the European Union and Qatari satellite television Al-Jazeera.