By Annie Banerji

NEW DELHI (Reuters) - India has jurisdiction to try two Italian marines charged with killing two fishermen, the country's Supreme Court said in a long-awaiting ruling on Friday, setting the stage for a criminal trial that could further sour ties between India and Italy.

The marines, members of a military security team protecting a cargo ship, Enrica Lexie, say they mistook the fishermen for pirates off the southern Indian state of Kerala in February 2012.

Italy went to the New Delhi Supreme Court last year to challenge India's right to try the sailors, Massimiliano Latorre and Salvatore Girone, arguing that the shooting had taken place in international waters, outside the jurisdiction of Indian courts.

The Supreme Court ruled that Kerala state courts did not have the authority to adjudicate in the case and ordered that a special federal court be set up to try the marines, lawyers who attended the hearing said afterwards.

"The relief for the marines is that at least they won't be prosecuted by Kerala," Diljeet Titus, one of the lawyers representing the Italian marines, told Reuters.

There were no immediate details of the reasons for the court's decision in a case that has caused a diplomatic rift between Italy and India, which have traditionally had good relations.

In Rome, the government said the decision was "encouraging" and that its main objective was to bring the marines home.

MARINES TO CHALLENGE DECISION

Indian authorities had argued that the shooting took place in a "contiguous zone" where Indian law applies. Italian embassy officials declined to comment to reporters outside the court.

"The government of India should ensure that they are brought to the book otherwise nobody will value Indian lives," said Father John Churchill, a priest and relative of 19-year-old Ajesh Binki, one of the slain fishermen, as he welcomed the court's decision.

The Italians have been confined to the Keralan city of Kochi but spent Christmas in Italy after a court allowed them to join their families for the holiday, on condition that they returned to India by January 10, which they did.

The sailors will now be brought from Kochi to the Indian capital, where they will remain in the custody of the Italian embassy. They will have to report to a local police station once a week and their passports will now be surrendered to the Indian government. Continued...