The Taliban in Pakistan has beheaded two government officials in Swat valley in the North West Frontier Province - revenge for the killing of two commanders, police say.
The announcement was made as Pakistani authorities appealed on Sunday to Taliban fighters to lay down their weapons.
The government said the establishment of the higher appellate court for Islamic law, or Dar-ul-Qaza, announced by the NWFP authorities on Saturday, fulfils the final part of a deal demanded by the Taliban in exchange for peace.
The creation of the sharia court was among the demands of the Tehrik Nifaz Shariat-e-Muhammadi, a group led by Sufi Muhammad, an influential local religious leader.
The court will have jurisdiction over the Malakand division, which includes Swat, Dir and Buner - the scene of recent fighting between the Taliban and government forces.
An initial deal signed in February, allowing the Taliban to enforce its own interpretation of sharia in Malakand in exchange for peace, has failed to end hostilities.
The killing of the two government workers on Sunday is sure to raise more doubts about the policy of engagement with the Taliban.
The Taliban has refused to disarm and continue to pour out of Swat into neighbouring districts.
They resumed armed patrols on Sunday in Mingora, the valley's main town, according to Pakistani officials.
A curfew was ordered overnight and officials said they were discussing what to do if the Taliban violated the order.
Al Jazeera's Kamal Hyder, reporting from Islamabad, said on Monday: "This is the first time since the deal was first negotiated in February that the authorities have enforced curfew in Mingora.
"Despite the curfew residents saw armed Taliban on the street which is a clear violation of the peace deal.
"The deal is under tremendous strain and a lot of people have fears that it will not last."
Separately, Pakistan's army accused the fighters on Sunday of "gross violation" of the peace pact, blaming them for several acts of violence over the weekend in Swat, including the destruction of a bridge.
Al Jazeera's Sohail Rahman in Islamabad said: "The government went out on a limb last night. They said 'we are setting up those eight courts and we will appoint the judges'.
"[However], at the moment Sufi Muhammad's spokesperson is saying that they [the fighters] were not taken into confidence, so read into that what you will."
While making the Dar-ul-Qaza announcement on Saturday, Mian Iftikhar Hussain, the NWFP information minister, quoted Sufi Muhammad as saying that anyone who continues to hold arms after the new regulations would be considered an insurgent.
"Now anyone carrying arms would be treated as a rebel and would be prosecuted in the qazi courts," Hussain said.