State lawmakers advanced a proposal yesterday that would require legislative approval for the sale of any ceded lands — those once held by the Hawaiian monarchy — but it was unclear what effect the policy would have on the lawsuit that sought to block any such transactions.

During testimony on the proposal, Senate Bill 1677, attorneys indicated that a clear legislative policy on ceded lands would be needed for a settlement in the lawsuit brought by the Office of Hawaiian Affairs.

The lawsuit, filed in 1994, sought to stop the transfer of 1.2 million acres of ceded lands to developers for affordable-housing projects, and the Hawaii Supreme Court sided with OHA, blocking the sale. On March 31 the U.S. Supreme Court unanimously overturned that ruling and sent it back to the Hawaii court, but attorneys said they hoped to work out a settlement.

“;Based on the passage of the bill, we are hopeful that a settlement in the ceded lands matter can be reached,”; OHA Administrator Clyde Namuo said yesterday in an e-mailed statement. “;There are a few more matters which need to be worked out before we can make an official announcement.”;

Attorney General Mark Bennett declined comment.

Meanwhile, under SB 1677 the sale of any state-held land would require two-thirds' approval in both the House (34 of 51 members) and the Senate (17 of 25 members).

State Rep. Mele Carroll, House Hawaiian Affairs chairwoman, had sought a full moratorium on all transactions involving ceded lands until native Hawaiian claims can be settled, but accepted the compromise with Senate negotiators working on the bill.

“;I guess you could say it was a success in the sense that the policy needs two-thirds' majority of approval, which is not very easy to do,”; said Carroll (D, Lanai-Molokai).

Carroll voted in favor of the compromise version of the bill “;with reservations,”; an indication that she still had some concerns.

“;When an inventory (of land) has not taken place, it's truly hard to justify, for me, that policy,”; she said. “;For me, if the dispute is not actually resolved, how can you still have an opportunity or process to sell land?”;

Gov. Linda Lingle has said the state has no plans to sell any ceded lands, but contends that the state should have title to the land and reserve the right to sell.

The proposal now faces a floor vote next week in each chamber before going to Lingle for consideration.