The Italian government agreed Friday to make an offer of around 400,000 U.S. dollars to the families of two Indian fishermen allegedly killed by Italian sailors who mistook them for high seas pirates.

The Italian sailors allegedly opened fire on the two fishermen who were working in a part of the Indian Ocean frequented by pirates, leading to a proxy battle over international jurisdiction.

The settlement from the Italian government is worth 10 million rupees, the Indian currency, to each family -- a sum that translates to around 193,000 U.S. dollars each. In return, lawyers from the families involved say they will sign documents to promise not to file further action against the Italian state.

Italian Minister of Defense Gian Paolo di Paola on Friday termed the settlement a "goodwill gesture" and not an admission of guilt.

But the Indian government has filed for criminal proceedings in the southern Indian state of Kerala against the sailors, Massimiliano Latorre and Salvatore Girone.

Meanwhile, Latorre and Girone, both naval officers posted to a merchant cargo ship for security reasons, remain in custody in India.

"This will drag on for a while, and the whole time there will be two issues at stake," said Pier Paolo Seripa, an international law expert at Roma Tre University. "One is the fate of these two Italian sailors, and the other is what this will have to say about issues related to open-water jurisdiction and sovereignty."

Italy maintains the officers should be tried in Italian courts, since the event took place in international waters, around 21 nautical miles (33 kilometers) from the Indian coast.

But India insists that as a criminal case which took place near Kerala, it should be decided on by the Indian courts.

The case has sparked headlines in both countries, with strong public opinion against the other side in both countries, making a negotiated solution more difficult.

That has not kept Italy from trying. Ever since the arrest of Latorre and Girone in February, Italy has launched an all-out diplomatic effort to resolve the case.

Minister of Foreign Affairs Giulio Terzi di Sant-Agata, a former Italian ambassador to the United States, traveled India to meet with government officials there, while senior Ministry of Defense officials have made multiple visits to pressure India into changing its stance.