* Emergency law lifted after crackdown that began in March
* Decision this week on whether Formula One will return
* Opposition fears repression will continue
By Andrew Hammond
MANAMA, June 1 (Reuters) - Bahrain lifted martial law on Wednesday in what the government hopes will be a sign to tourists and business of a return to normal, but the opposition fears repression is set to continue.
The authorities are especially keen to get back the Formula One race. The prestigious March event in the motor-racing calendar was cancelled because of unrest that erupted in February when pro-democracy protesters, inspired by uprisings in Egypt and Tunisia, took to the streets.
A meeting of the sport's governing body on Friday could reinstate it for later this year, but U.S.-based Human Rights Watch has said a heavy crackdown on opposition activists during 11 weeks of martial law should count in the decision.
On Wednesday, the dusty streets of the capital, Manama, were calm, and a military camp set up next to to a large roundabout that was the focal point of protests had dwindled to a few armoured vehicles.
King Hamad bin Isa al-Khalifa, whose Sunni Muslim family rules over a majority Shi'ite population, offered a dialogue on reform in a speech on Tuesday.
While the king spoke, military prosecutors summoned four members of the main opposition party Wefaq, including its leader, and rights activist Nabeel Rajab, for questioning. They were released after several hours, acquaintances said.
"The end of the national security law and announcement of dialogue are both positive. It will be a shame if anyone is negative about it," said Jamal Fakhro, a Sunni lawmaker.
"Bahrain will welcome Formula One, and any other event. There's nothing wrong with that because life is back to normal now and it wil be excellent to have it back."
Bahrain, which hosts the U.S. Fifth Fleet, is a faultline in the standoff between Iran and the U.S.-allied ruling dynasties of the energy-producing Gulf Arab region. Bahrain says Iran orchestrated the protests through links to Shi'ite groups.
U.S. President Barack Obama criticised the Bahraini crackdown in a speech this month, saying the government should begin dialogue with peaceful opposition leaders.
Activists are trying to stage marches in Shi'ite villages later on Wednesday. Online flyers describe them as "loyalty to the martyrs' blood" and one advertises a return to Pearl Roundabout, where protesters camped out for over a month.
Syria lifted a decades-old emergency law to meet a demand of protesters, but that has not calmed unrests there.
MILITARY COURTS STILL
With Bahrain's state of emergency over, military prosecutors can no longer call in civilians but military courts will still hear several cases started since martial law began on March 15.
Twenty-one opposition figures -- seven of whom are abroad -- are on military trial on charges of seeking to overthrow the system. Most of them are from parties that called for a republic. Rights activists say they have been tortured.
Future verdicts could spark protests.
Sunni Islamist groups are calling for death penalties and no royal amnesty. "No pardon for the leaders of strife, the sick elements must be uprooted" a large sign says outside the offices of Asala, one of the groups, with an image of a noose.
Since calling in Saudi and United Arab Emirates forces to help quash the protest movement, the authorities have also unleashed a campaign of detention and dismissals affecting thousands who took part, most of them Shi'ites.
Dozens of Shi'ite places of worship have also been demolished and four people have died in custody.
Rights activists say it is not clear how many remain in detention. Dozens of doctors and nurses have been arrested and health services have been purged of Shi'ite managers.
State media says medics stored weapons at Pearl Roundabout and a nearby hospital. Doctors who have been released deny this, saying they were forced to sign and record confessions. "I expect to see a lot of gloss before the summer kicks in. There will be some reform on the surface but a hardline approach," a diplomat said. "There will be less checkpoints but you won't be able to go into the Shi'ite villages easily."
Tanks and other military vehicles were gone from outside government ministries and the financial district, but a number of small armoured patrol vehicles of the Interior Ministry-run National Guard were stationed around Pearl Roundabout.
The government has renamed the roundabout the Farouq Junction, a reference to an early Islamic leader who Shi'ites consider was against their cause.
Pro-government newspapers said on Wednesday that security checkpoints would be maintained permanently in locations to be announced. (Editing by Reed Stevenson and Alistair Lyon)
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