Geneva authorities have rejected calls by Libya to apologise over the handling of the arrest of one of Moammar Gaddafi's sons in 2008.
"We have found that the rule of law was respected, that international conventions were not violated and in the final analysis, there was perhaps a problem of a lack of tact," the cantonal government president, David Hiler, said on Wednesday.
He added that the Geneva police would not be made scapegoats in the case and negotiations between the two countries needed to take place at state level.
Hannibal Gaddafi and his wife were arrested in July over complaints of mistreatment by two of their staff while at a hotel in Geneva. Charges against them were dropped in September after the servants withdrew their complaint, having reached a financial arrangement with Hannibal.
Relations between the two countries have been strained ever since. Libya has demanded an apology for the "abuse of Libyan diplomats and business people by the Geneva police" and called for the officials responsible to be punished.
Since the row erupted the Swiss foreign ministry has been conducting talks with Libya in an attempt to find an agreement, but few details have emerged.