I think its been well established by Ligh, Nikodemus, and Draklar that its possible to make it ooc by ignoring the fact that hydlaa is a secure city and not a defesnless city. But at the same time if role played properly it can be IC, i've seen occasions, they typically take place behind a building, somewhere far from harnquists out of the public eye.
Realisticly if you were going to kill someone, would you do it in the middle of the most lively, active part of the city? or would you wait and follow them to a more quiet, unknown part of town where there are fewer eyes to witness your crime?
So the answer, No, fighting in hydlaa is not always ooc... but it certainly is when ahem you kill a guy at the fountain and don't role play the fact that EVERYONE likely knows that you just murdered, including the guards. Or how about the famous battles at harnquist?
Harnquist seems to be a hub for all passing by hydlaa, so its typical for lazy, carless thugs to start fights there, however most don't realise that since its such a big gathering spot that they don't stand a chance of escaping the law.