ISLAMABAD — Prime Minister Yousuf Raza Gilani suggested on Wednesday that relatives of two Pakistani men shot dead by a US official might pardon the American, but also said it was for a court to decide the man's fate.

The comments came as US Senator John Kerry visited the country to hold talks with Pakistani leaders aimed at resolving a bitter diplomatic row over Raymond Davis, who shot the two men in a busy Lahore street on January 27.

Pakistan's fragile ties with the United States have been plunged into crisis by the shooting. Davis has insisted he acted in self-defence.

Speaking to a convention of religious scholars, Gilani stressed the role of the courts in deciding on whether Davis, who is in Pakistani custody, could claim diplomatic immunity.

"Davis also has a lawyer, he will present his case and then the court will decide whether he has immunity or not," the official Associated Press of Pakistan quoted Gilani as saying.

However Gilani also asked the scholars to help find a solution to the sensitive issue in accordance with Islamic law, under which a victim's family can pardon a killer in return for compensation.

"Ulema (Islamic scholars) should tell the solution. Either the heirs should give a pardon or ask about 'Qisas' (compensation) or the court should decide. We don't have any role," APP quoted him as saying.

Gilani told the religious scholars the government was caught between a public backlash and international anger. "We are facing difficult decisions. There is a political price," Gilani said.

"We are just caught between the devil and the deep sea. This needs wisdom. We will do whatever is in the interest of the country and the nation," he said.

Kerry, who arrived late Tuesday in Lahore, voiced deep regret over the killings. Pakistan plays a key role in the United States' military operations in neighbouring Afghanistan.

In a meeting with Kerry, Gilani said that the Davis case should not affect relations between the two countries or their cooperation in fighting terrorism.

Gilani told Kerry that his expressions of regret over the case and the possibility of securing a religious pardon for Davis "should be considered to cool down the rising temperatures in the bilateral relations".

"It was imperative that the Davis issue must not be allowed to make bilateral relations hostage and have impact on the partnership in the on-going struggle against terrorism," a statement from Gilani's office quoted him as saying.

Gilani urged the United States to take into account the "ground reality that the principal stakeholders in Mr Davis case were the family members of those killed and the people of Pakistan."

Kerry "agreed with the prime minister that positive messaging would help to develop understanding between the two countries and discourage those elements who desire to exploit the situation to the disadvantage of strategic relationship build to fight extremism and terrorism."

Meanwhile, Pakistan's former foreign minister Shah Mehmood Qureshi, who was still in his post at the time of the shootings, said on Wednesday that in his view Davis did not have full diplomatic immunity.