Both passive disabling passives are canceled out.
All other character’s passives in the battle work.
So since the 2 opposing prisoner’s passives disable each other at the same time, that’s what must allow all the other passives to work. If one side has 2 prisoners and the other 1, then the side with only 1 gets disabled. So I’m guessing it’s based on odd and even numbers of these characters. Even number cancel and odd number uses the side with the extra toon to apply the passive disabling effect.