On 15 February 2012, two Indian nationals aboard the St. Antony, an Indian fishing ship, were killed allegedly as a result of gunshot wounds following a confrontation with the Enrica Lexie, an Italian merchant ship, in international waters, off the Indian coast. The nature of the confrontation has been in contention. Enrica Lexie was travelling from Singapore to Egypt accompanied by six Italian navy marines. Enrica Lexie began firing at India's Exclusive Economic Zone, because they thought pirate boat attacked them. Indian Navy detained the Enrica Lexie and two Italian navy Marines were arrested on charges of murder of two Indian fishermen. This incident caused dispute between India and Italy over criminal jurisdiction, functional immunity of Italian navy marines and the practice of arming merchant ships. They refer this dispute to arbitration and finally Tribunal issued its award. This paper via descriptive-analytical method, with exploring existing documents, conventions and customary international law shows that criminal jurisdiction over Italian merchant ship at EEZ belongs to flag state. Most countries to permit and even force to arm their flag merchant ships to fight against pirates, so this practice becomes a rule of customary international law. As a result, actions of these Italian marines attributed to Italy as a governmental act and state officials are entitled, in principle, to functional immunity from foreign jurisdiction regarding their ‘official’ acts, i.e., when acting in their official capacity.