The Shady Smuggler in the Canal Ward has this description:
"PvP may occur in the vicinity of this NPC, BUT NOT (instead of "if") if he is the only NPC here."
I didn't make him, but it reads:
"[PvP may occur in the area but not in the vicinity of this NPC if he is the only NPC here.]"
Pretty sure it means that it shouldn't occur directly next to the NPC, but it may otherwise occur in the area. Unless there are other NPCs around, in which case PvP shouldn't happen at all.
I will re-work it to be more clear...