* Mubarak was first toppled Arab leader to face trial
* Charges spanned graft, complicity in murder of protesters
* Concern Mubarak release could boost Islamist opposition (Updates throughout, adds context, quote)
By Lin Noueihed
CAIRO, Aug 19 (Reuters) - An Egyptian court dropped on Monday a corruption charge against Hosni Mubarak, the president ousted in the 2011 uprising, a ruling his lawyer said would clear the way to his release from jail soon.
Mubarak, who ruled Egypt for 30 years, was arrested soon after his overthrow and became the first Arab leader to face trial. In scenes that captivated Arabs, the octogenarian appeared in a courtroom cage to face charges that ranged from corruption to complicity in the murder of protesters.
More than a year on, the only legal grounds for Mubarak's continued detention rest on another corruption case which his lawyer, Fareed el-Deeb, said would be settled swiftly.
"All we have left is a simple administrative procedure that should take no more than 48 hours. He should be freed by the end of the week," Deeb told Reuters.
Without confirming that Mubarak would be freed, a judicial source said the former leader would spend at least another two weeks behind bars before the criminal court made a final decision in the outstanding corruption case against him.
That case related to gifts that Mubarak is accused of accepting during his presidency. Mubarak has recently repaid money equivalent to the value of those gifts, meaning he could potentially be freed though the court could choose to extend his sentence on other grounds or come up with new cases.
Mubarak, along with his interior minister, was convicted and sentenced to life in prison last year for failing to stop the killing of protesters in the revolt that swept him from power.
He still faces a retrial in that case after appeals from the prosecution and defence, but this would not require him to stay in jail. Mubarak did not appear at a hearing in the case on Saturday. He was also absent from Monday's session.
A POLITICAL DECISION?
Mubarak is being held at Tora prison on the southern outskirts of Cairo, the facility where senior members of the Muslim Brotherhood have been detained since they were arrested in a crackdown on the organisation that began in July.
The military removed President Mohamed Mursi, a senior Brotherhood official, on July 3 after mass protests against his rule. Mursi, who was freely elected but alienated many with his authoritarian moves, is in detention at an undisclosed location.
He faces an investigation into accusations stemming from his escape from prison during the anti-Mubarak revolt. These include murder and conspiring with the Palestinian Islamist group Hamas. Mursi has not been formally indicted.
Mubarak's trial has continued despite the army intervention against Islamist rule but, perhaps tellingly, the families of those killed in the uprising have ceased to attend the court.
One lawyer who has acted for those families said the former president is unlikely to be freed given the political divisions that have shaken the country since the army overthrew Mursi.
Mohammed Rashwan told Reuters that there remained some pending legal suits that could give the judiciary enough latitude to refuse Mubarak's release.
"This is bigger than a legal problem. This is a political problem because Mubarak's exit at this moment would tip the situation in favour of the Brotherhood. This is not a desirable outcome and one the current regime would not allow," he said.
"If Mubarak comes out at this time, the Brotherhood will exploit it to the utmost extent and claim that what is happening in Egypt is a return to the former regime."
In June, shortly before the military toppled Mursi, an Egyptian court ordered the release of Mubarak-era prime minister Ahmed Nazif because of a limit on pre-trial detention in a case for which he had been held since the revolt.
He is the highest-profile Mubarak-era official to be freed in cases which have failed to produce convictions that stick, prompting frustrated opponents of the old regime to accuse the judiciary of dragging out proceedings.
If Mubarak is freed, it will be on a similar technicality. (Editing by Michael Georgy and Mark Heinrich)