(Corrects name of Gaddfi son, paragraph 4)

GENEVA, Sept 2 (Reuters) - Two domestic workers who filed assault charges against Libyan leader Muammar Gaddafi's son in Switzerland, sparking a diplomatic row, have withdrawn their complaint, their Swiss lawyer said on Tuesday.

"My clients have decided to withdraw the criminal complaint that they had entered," Francois Membrez said in a statement.

"Their interests were safeguarded in so far as they were correctly compensated. They were recognised as victims and their suffering was acknowledged," the statement continued, offering no details of the indemnity.

Hannibal Gaddafi and his wife Aline were charged with ill-treatment of their two employees in Geneva in July after staff at a luxury hotel alerted police to repeated arguments in their suite. The complainants were part of the family staff and had travelled with them to Switzerland.

The Libyan leader's son and his wife denied the charges on which they were indicted, including bodily injury, restraint, and verbal threats.

Under Swiss law, the Geneva prosecutor can still pursue the restraint charge regardless of the employees dropping their complaint. Chief prosecutor Daniel Zapelli said last month he would not drop the case on account of the diplomatic pressure surrounding it.

Gaddafi's arrest caused uproar in Tripoli and embarrassment for Switzerland, which uses Libya as its main energy supplier.

In the wake of the arrest, Libya's Foreign Ministry advised its citizens not to travel to Switzerland and Tripoli threatened to halted oil shipments to Switzerland and stop issuing visas to Swiss nationals. Two Swiss nationals in Libya were also detained and later released.

Hannibal Gaddafi has run into trouble in European countries before. In May 2005, a Paris criminal court gave him a suspended four-month prison sentence for slapping a pregnant woman and carrying a gun without a licence. (Reporting by Stephanie Nebehay and Laura MacInnis; editing by Robert Hart)

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