When Magit calls git it adds a few global arguments including
--literal-pathspecs and the git process started by Magit then passes
that setting on to other git process it starts itself. It does so by
setting the environment variable GIT_LITERAL_PATHSPECS, not by calling
subprocesses with the --literal-pathspecs argument. You can therefore
override this setting in hook scripts using unset
GIT_LITERAL_PATHSPECS.