Totally agree with you about keeping religion out of government and public life in general.
That being said, can we please not make this story about Islam?
This has nothing do to with Islam or cultural relativism and everything to do with Lybia being a totalitarian regime.
Gaddafi is the local thug and dictator, but he is not an islamist by far. He's an arab nationalist, an ideology that is largely secular (very much like Saddam Hussein was), yet he has supported and backed terrorism several times in the past (
Lockerbie Bombing). Please try to have a wider perspective, most of the dictators in power in Muslim countries don't give a shit about Islam, they are only looking out for themselves. They might use religion to try to legitimize their regimes or as a populist tool to fight their democratic opponents.
This is what happen we you do business with autocratic regimes that have no respect for the law or for basic human rights and liberties. The only real rule is the whim of the local leader/prince.
Switzerland learned the hard way, when Lybia kept
two Swiss nationals hostage during several months as retaliation. This because the Swiss police arrested Gaddafi's son for beating his servants and treating them as slaves.
Bottom line: If you do chose to do business in authoritarian non-democratic countries, be prepared to pay the cost and lose it all at any point in time.