Raymond Davis killed two people in what he called an act of self-defence, has been charged with murder [EPA]

A Pakistani court has formally charged a CIA contractor on two counts of murder at a hearing held at a prison in Lahore, a police official said, in a move that may further strain relations with the United States.

Raymond Davis, 36, shot dead two Pakistanis in the eastern Punjab city on January 27 following what he described as an attempted armed robbery.

He said he acted in self-defence while the United States says he has diplomatic immunity and should be
repatriated.

"He has been indicted," a police investigator assigned to the case told Reuters from inside Kot Lakhpat prison, where the trial is being held under tight security.

If convicted, Davis could face the death penalty.

Questions surround the identity of the victims, with some media reports saying the men worked for Pakistan's
Inter-Services Intelligence (ISI) agency, and that they might have been known to Davis.

The case has also strained ties between the CIA and Pakistan's main Inter-Services Intelligence (ISI) agency, which said it was unaware Davis was working in Pakistan.