I have a question on the guilt or innocents of the merchants in Kelmarane. The Merchants that are in Kelmarane and actively trading with the gnolls and other outlaws, how complicit in the crimes of the gnolls? My thought on the matter is by trading with those raiding caravans they are just as guilt as those who interrupting the trade in the first place. How much leeway do you give merchants in their freedom to trade, in the land of free trade?
Kelmarane is beyond the law until the PCs get there. The gnolls trade slaves in Katapesh, and the merchants trade with them. I don't think there's any clear moral high ground here.
I guess it would depend on who's dealing the justice. Along Katapeshi law, they are not doing anything illegal. I'd think Lady Almah and the Pactmasters would endorse them, they want the Battle Market working (as long as the city of Katapesh gets it's cut). If you have vengeful PC's they might see it different I suppose. My group included a LG Cleric of Sarenrae and they confiscated the merchant's wares as a fine and that was it.