Israeli Deputy Prime Minister Dan Meridor cancelled an appearance at a London fundraising dinner this week over fears he could be arrested under universal jurisdiction legislation.
The Israeli Justice Ministry warned Mr Meridor that a warrant for his arrest might be issued if he entered Britain.
He had been due to speak at the Bicom dinner on Monday evening, to replace Prime Minister Benjamin Netanyahu, who cancelled last week citing the delicate state of the peace negotiations.
Arguments over alterations to the universal jurisdiction legislation have continued since the coalition government came to power in May.
Justice Minister Ken Clarke announced in July that he would table a legislative amendment which would ensure the Director of Public Prosecutions (DPP) would need to give consent for an arrest warrant to be issued in response to a private prosecution for war crimes.
The government has repeatedly said it would act as soon as parliamentary time allows to implement the changes, but predicted it may take until the end of November or December.
The Ministry of Justice would not comment on Mr Meridor's decision to stay away, but confirmed it was planning to act "in due course" to resolve the issue.
Bicom chief executive Lorna Fitzsimons said: "Israeli law officers did not think they should take the risk of allowing him to come.
"Foreign Secretary William Hague intervened and the British government tried to make it work. They are committed to changing the law and it cannot come soon enough."
Labour MP Louise Ellman, who questioned Mr Clarke in the Commons about the possible changes a fortnight ago, said the current position was "unacceptable and unsustainable".
She said: ""It cannot be acceptable for our ally Israel not to be able to send its leading politicians to the UK."