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TRIPOLI (Reuters) - A Libyan court has found Rachid Hamdani, one of two Swiss businessmen whose prosecution has strained ties between Libya and Switzerland, not guilty on charges of violating business rules, his lawyer said on Sunday.

"He is free to leave Libya if there is no appeal," lawyer Salah Zahaf told reporters.

The cases of Hamdani, who works for a construction company, and second Swiss businessman Max Goeldi, have unsettled some of the foreign investors who flocked to Libya after the oil producer emerged from international isolation.

Hamdani and Goeldi were initially found guilty on charges of violating Libya's immigration rules and sentenced to 16 months in jail. Prosecutors later added a second set of charges, for breaching business regulations.

Last month an appeal court overturned Hamdani's conviction on the immigration charges.

A Libyan judge on Saturday fined Goeldi, the head of Libyan operations for Swiss-Swedish engineering firm ABB, 1,000 dinars for violating business rules.

Goeldi's appeal against the immigration conviction will be heard later this month.

The two men have been staying inside the Swiss embassy in Tripoli, where the Libyan authorities have no jurisdiction.

They were barred from leaving Libya in July 2008 after Swiss prosecutors briefly arrested Hannibal Gaddafi, a son of Libyan leader Muammar Gaddafi, on charges of mistreating two domestic employees during a visit to Switzerland.

The charges were later dropped but Libya cut oil supplies to Switzerland and withdrew more than $5 billion in assets from Swiss banks. Libyan officials deny any connection between the arrest in Switzerland and the case of the two businessmen.