This happens? Regularly enough to be an example? And outside of comics like KotDT? I mean, I assume it happens somewhere, but does it happen to everyone and I'm just missing out?
I've seen it a few times, although usually from novice players and/or evil-aligned parties.
It would horrify me, mostly because the PC's turning criminal would probably lead to a very short campaign unless the PC's were really high level and could survive what a nation could throw at them (including rival mercenaries).
A whole nation? Seems a touch excessive for a case of attempted murder. I'd have the town watch come after them, certainly, but if they had the sense to skedaddle and not come back to that particular burg, that'd be as far as it went.
Of course, PCs with that kind of sense don't usually try to murder people in public to start with. If they tried to stand their ground and make a fight of it, they'd soon be fighting the whole town. If they slaughtered the town, then it would start escalating...