Tamil Tiger rebels have lodged an official protest after a Sri Lanka court handed down a 200-year prison sentence on their leader, Velupillai Prabhakaran.

We are rather disappointed and deeply hurt at this juncture that a judgement has been passed on our leader

Anton Balasingham, rebel delegate

The High Court in Colombo sentenced Mr Prabhakaran on Thursday for involvement in a 1996 bomb attack in which almost 80 people were killed.

The verdict was passed just as government and rebel delegates began their landmark second round of peace talks at a Thai resort near Bangkok.

Earlier on Friday, the two delegations reached agreement on setting up a body to appeal for foreign aid to rebuild areas ravaged by two decades of war.

Headway

The chief Tamil Tiger negotiator, Anton Balasingham, described the sentence as "ridiculous and absurd," but said it would not affect the peace talks themselves.

He added it "might affect the spirit of the peace process."

Despite this, Mr Balasingham said he was very optimistic about progress in the talks.

The new body to administer reconstruction work will have four rebel and four government representatives and will ensure that any funds pledged are disbursed and accounted for correctly.

The talks are being held against a backdrop of simmering tension in Colombo between members of the Sinhalese and Muslim communities.

Recent clashes led to the death of a man, and a number of other people being injured.

On Friday, a curfew was reimposed in the north of the capital to prevent further violence.

'Confident'

BBC Sri Lanka correspondent Frances Harrison, who is in Thailand, says the mood on the government side is upbeat because of the progress made so far.

The rebel leader was sentenced in absentia

The talks are the first concerted attempt to bring to an end a conflict that has claimed the lives of some 64,000 people.

The head of the government delegation, GL Peiris, said he had every reason to be satisfied with the outcome of the discussions so far.

"We have come up with a structure that will be acceptable to the international donor community," he said.

He said he was very confident the international community would respond positively to the agreements reached in Thailand.

Donors will be gathering later this month in Norway for a pledging conference to help the island nation rebuild areas affected by war.

Our correspondent says some countries have been reluctant to come forward with funds before there is a final political settlement.

But she says the thinking at the peace talks is to develop a strategy to convince donors the time is right to disburse aid as a final agreement may take years.

Security

The other issue under consideration at this point in the talks is security.

The head of Sri Lanka's main Muslim party, Rauf Hakeem, held discussions with Tiger military commanders about security guarantees.

Mr Hakeem said he had received assurances that the Tamil Tigers were "keen to implement" a deal agreed in April, which is intended to protect Muslims in the east of the island from rebel attacks.