Narrated Abdullah ibn Abbas: When this verse was revealed: "If they do come to thee, either judge between them, or decline to interfere. . . . If thou judge, judge in equity between them. " Banu an-Nadir used to pay half blood-money if they killed any-one from Banu Qurayzah. When Banu Qurayzah killed anyone from Banu an-Nadir, they would pay full blood-money. So the Messenger of Allah ﷺ made it equal between them.
Hadith Referenceسنن ابي داود / كتاب الأقضية / 3591
Hadith Gradingالألبانی:حسن صحيح الإسناد | زبیر علی زئی:ضعيف, إسناده ضعيف, نسائي (4737), داود بن الحصين عن عكرمة : منكر, انوار الصحيفه، صفحه نمبر 128
Hadith Takhrij« سنن النسائی/القسامة 5 (4737)، (تحفة الأشراف: 6074)، وقد أخرجہ: مسند احمد (1/363) (حسن) »
´It was narrated from Dawud hin Al-Husain, from 'Ikrimah, from Ibn 'Abbas, that the Verses in AL-Ma'idah, in which Allah, the Mighty and Sublime, says:` "Either judge between them, or turn away from them. If you turn away from then up to: those who act justly."[1] - were revealed concerning the matter of blood money between An-Nadir and Quraizah. That was because the slain of An-Nadir were of noble status, so the blood money would be paid in full for them, but for Banu Quraizah only half of the blood money would be paid. They referred the matter to the Messenger of Allah for judgment, then Allah, the Mighty and Sublime, revealed that concerning them, so the Messenger of Allah told them to do the right thing and he made the blood money equal.
Hafiz Muhammad Ameen
(1) Non-Muslims living under Islamic rule are called dhimmis. They will settle their personal matters according to their own traditions, but those matters which pertain to the court will be decided according to the national law. By national law is meant the Islamic Shari‘ah. Religion and faith are counted among personal matters. Transactions between people, crimes and punishments, etc., fall under national matters.
(2) The researcher of the book has declared both of the aforementioned narrations to be weak in terms of their chain of transmission, whereas other scholars write regarding these two narrations that, when combined, they reach the level of authenticity. And in terms of evidence, this opinion appears to be closer to correctness. And Allah knows best. For further details, see: (al-Mawsu‘ah al-Hadithiyyah, Musnad al-Imam Ahmad: 5/401, and Dhakheerat al-‘Uqba Sharh Sunan al-Nasa’i: 36/6-12)
Source: Sunan Nasa'i: Translation and Benefits by Shaykh Hafiz Muhammad Amin Hafizullah, Page: 4737