Check out the location awareness help pages on Twitter:

http://twitter.zendesk.com/forums/26810/entries/78525

Right at the bottom it says that it only works in the US right now.

Here are the new steps with screenshots

1. Go to https://twitter.com
2. Click on lists
3. Choose a list and select View list page
4. Click "Following" on the list page
5. Select the person icon next to the user you want to edit
6. Then decide whether you want to remove or add a person to the list

Alternatively, you can go the user's page and decide and remove that person from there

Note

The UI ideally should hint that "Add to List" also includes remove from list.