In "grey areas" like this one I would leave it up to the PCs skills.
As a GM I would have had the BBEG plead for life, swearing to change. Promising to turn himself in and never kill again. If the PCs passed a sense motive check, they would know he was lying and killing him would be fair game. However, if they failed the check, the villain would go free; to turn himself in of course.
Situations like this can lead to excessive party bickering and it slows down gameplay. Roll the dice and move on.