We have decided to revise the DMTNT rule to allow for more personal roleplay possibilities after destruction during a hostile player encounter.
Old wording:
2.3 - Dead men tell no tales - when you are destroyed during a hostile player encounter, your character loses all memory of that encounter, other than that their ship was destroyed.
New wording:
2.3 - Dead Men Know No Facts: When you are destroyed during a hostile player encounter, your character's account of events becomes unreliable, and cannot be used to enforce roleplay consequences. Characters may still use the memory in personal roleplay, but not to utilize Faction Rights, push diplomacy/law changes, etc.
I'd like to also thank the community as a whole for the feedback and ideas regarding this.
Credit for the new wording goes to @DarkTails.