A court freed Davis after blood money was paid in accordance with sharia law, the Punjab Law Minister Rana Sanaullah said.

“The family members of the slain men appeared in the court and independently verified they had pardoned him (Davis),” Sanaullah told a private television.

“He has been released from jail. Now it is up to him. He can go wherever he wants,” he added.

Raja Irshad, a lawyer for the families of the two dead men, said a total of 200 million Pakistani rupees (2.35 million dollars) was paid as compensation. That was confirmed by public prosecutor Abdul Samad.

“The family members told the judge that there was no pressure on them to accept the compensation and they had signed the pardon documents voluntarily, independently and with due consideration,” Irshad said.

Police investigator Muneer Ahmed told AFP the deal had been done by “mutual agreement” and the court had received signed family statements before ordering Davis' release.

PML-N spokesman Pervez Rasheed said the Punjab government was not involved in the release of Davis, DawnNews reported.

Moreover, Ayesha, the sister of Shumaila Kanwal, the wife of victim Faheem Ahmed, said “we are not aware of any such settlement and we did not opt for any…we want justice.”

“They confined us in the jail for four hours and did not allow us to take part in the court proceedings. We were not allowed to leave the prison,” one of the lawyers, Asad Manzoor Butt, told AFP.

Butt said the families of the men had agreed with authorities to accept blood money over the deaths the previous night.

Another laywer for the families, Nauman Atiq, confirmed that the lawyers had been held at the court and told not to speak to media.

Blood money, or “diyya” is a provision under Islamic sharia law in which compensation can be paid to relatives of those killed to secure a pardon, and is commonly used to resolve such cases in Pakistan.

The January shooting ruptured diplomatic relations with the United States, who repeatedly insisted Davis was an embassy employee and enjoyed diplomatic immunity, particularly after it emerged he was working for the CIA.

The Davis case had sparked protests in Pakistan, with religious groups angrily denouncing the American who claimed he acted in self-defence to fend off an armed robbery when he shot dead the two men.

US authorities insisted Davis was protected by full diplomatic immunity, but the Pakistan government refused to back that claim and a decision on his status was on Monday deferred by the Lahore high court for criminal judges to decide.

Revelations that Davis was a CIA contractor heaped pressure on Pakistan’s embattled government and further ramped up burning public mistrust of Washington, damaging fragile relations between the two wary allies.

A third Pakistani was struck down and killed by a US diplomatic vehicle that came to Davis’ assistance in the January incident.

US officials denied Pakistan access to the vehicle, and the occupants are widely believed to have left the country.

Police have said they recovered a Glock pistol, four loaded magazines, a GPS navigation system and a small telescope from Davis’ car after the January 27 shooting.