A Pakistani court Thursday delayed a highly anticipated decision on whether Raymond Davis, the US official charged with murdering two Pakistanis, is entitled to diplomatic immunity. The delay threatens to prolong a dispute that has brought relations between the US and Pakistan, a key ally, to a new low.

“As the deputy attorney general has requested three weeks to submit a reply on the status of Raymond Davis, the case is adjourned until March 14,” Lahore High Court Chief Justice Ejaz Mohammad Chaudhry told the court.

The three-week delay, requested by Pakistan’s Ministry of Foreign Affairs so it could further investigate the status of Mr. Davis, could harm everything from US aid to Pakistan, to military cooperation in a relationship that is already difficult.

The row has led to an intervention by President Obama, who on Tuesday said the US expects Pakistan to abide by its obligations to the Vienna Conventions, which governs diplomatic immunity.

The US also sent Sen. John Kerry (D) of Massachusetts, who is Chairman of the Senate’s Foreign Relations Committee, to come work on a swift resolution. He assured Pakistan that Davis would face criminal charges at home if deported.

The Raymond Davis case: how it's playing out

Davis was arrested last month for shooting two men on motorcycle from his car in a lower-middle class area of Lahore. A third man was killed after being struck by a US diplomatic vehicle sent to assist Davis. Davis claimed self defense, though police officials have disputed that claim, saying that he shot his victims in the back.

The incident sparked widespread protests and has played into the hands of conservative religious parties. Many Pakistanis believe he is a US spy. It has dominated headlines, which have focused on the fact that Davis had surveillance equipment and an unlicensed semiautomatic weapon on him at the time of his arrest.

Pakistani politicians, including President Asif Ali Zardari and Prime Minister Yusuf Raza Gilani, have insisted that the courts be allowed to carry out their own process, while the US has insisted upon Davis’s return.

As the dispute rumbles on, diplomatic relations between the two countries have taken a nosedive. A group of visiting US congressmen to Pakistan last week warned that failure to handover Davis could lead to a cut off from US aid. In 2009, the US signed a $7.5 billion civilian aid agreement for five years, while $2 billion in military aid was proposed by Obama in 2010.

Hurdles to the Raymond Davis case

According to Ahmer Bilal Soofi, an international law expert, there remain key legal hurdles for government officials to decide on Davis’s status. While Pakistan is a signatory to the Vienna Conventions, it did not codify all the Conventions' articles into its own domestic law.

He explains: “When a diplomat arrives, the normal tradition is that prior intimation of his arrival needs to be given. The Vienna Convention is somewhat flexible on this. It gives the sending state the flexibility regarding timing, whereas the government of Pakistan is saying they should have informed us before the incident.”

Still, it appears the Pakistan government’s stance may be softening, as it hopes to eventually get a verdict in the court that deports Davis and absolves the government of paying a higher political price, say some experts.

If the Pakistani government hands Davis back without sufficiently preparing pubic opinion, says Zafar Hilaly, a retired Pakistan ambassador, it could face a major backlash that eventually leads to its downfall.

“It's become such a huge [issue]," he says, that "there's a feeling, not without reason, that it might be the last straw that breaks the camel's back.”