Ramsay loses out to Lord of the Rings director for new film Scot is dropped from dream project on best-selling novel

Lynne Ramsay, the Glasgow director had, until recently been charged with bringing The Lovely Bones to the big screen.

But Jackson has taken over the project. The New Zealander has bought the rights to the book from FilmFour, and with Fran Walsh, his screenwriter wife, will begin work after their current movie - a remake of King Kong.

Ramsay, the director of Ratcatcher and Morvern Callar, announced she was working on a version of the book - about the afterlife of a murdered teenager - more than two years ago. She was advanced in her preparations - she had written a script, had begun scouting for locations in the US, and was considering her cast.

The Scot had even met Steven Spielberg and his Dreamworks company to discuss finance, but the project appeared to stall when FilmFour, which owns the rights to the book, scaled back its production in 2002.

Then, in April of last year, it emerged that Jackson, fresh from his critical and commercial success with the Lord of the Rings trilogy, was interested in bringing the book to the screen, and that Ramsay was no longer associated with the film.

Last night, a spokeswoman for FilmFour denied Ramsay had been dropped from the project in favour of Jackson, who made Heavenly Creatures, a similarly eerie low-budget film starring a youthful Kate Winslet.

It appeared to those inside the film industry that Jackson's "bigger" name - as far as box office success was concerned - had triumphed over the allure of Ramsay's arthouse cachet.

"We were working with Lynne for two years up to March or April last year, but then we went our separate ways, in an amicable way, " the spokeswoman said.

"These things happen in the film industry all the time and she was not 'shafted'. They parted company with Lynne and then they took up Peter's interest in the project."

Ramsay has, so far, not commented on the film or her next project. A friend denied last night that she was upset by the turn of events, adding: "She won't let this affect her, she knows how the industry works.

"I know she is writing a new film and she always has great ideas: she's an auteur and it is for the best she is writing her own scripts. It doesn't take a genius to work out what happened in this case."

Ramsay is known for her beautiful cinematography, scripts and use of non-professional actors.

Her early short films, Small Deaths, in 1996, and Gasman, 1998, both won the Best Short Film prize at the Cannes film festival and her debut feature, Ratcatcher, was judged best British film of 1999.

The Lovely Bones movie, coproduced with FilmFour, will be released in 2007, with Jackson as director and producer.

Jackson said of the story:

"It's the best kind of fantasy in that it has a lot to say about the real world.

"You have an experience when you read the book that is unlike any other. I do not want the tone or the mood to be different or lost in the film."

He added: "The Lovely Bones is that rare combination - a story of personal tragedy that is heartbreakingly sad, even brutal, and yet infused throughout with acts of love, understanding and compassion.

"We're all looking forward to working on this extraordinary project."

Tessa Ross, a producer at FilmFour, said: "It is with enormous pleasure that I announce this partnership.

"I love this book and am an enormous fan of Peter's filmmaking. I believe it will be an exceptional creative marriage.

"I have every faith that Peter and his collaborators will bring great vision to Alice's beautiful novel."

In the book, the murdered character of Susie Salmon observes the living from a heaven that closely resembles her school playground.

Ms Sebold said: "I am honoured that Susie Salmon will get to hang out in New Zealand with the psychedelic trio of Jackson, Walsh, and (co-writer) Philippa Boyens.

"I have a distinct feeling that the four of them are going to get along fabulously."