The prospect of law firm limited liability partnerships (LLPs) edged closer last week with the publication of a draft bill addressing concerns expressed by the legal profession.But at the same time Peter Mandelson, Secretary of State for Trade and Industry, ruled out any change in the law on joint and several liability.

Mr Mandelson said 'no convincing case' for a fundamental change in this law had been made.Instead professionals will have to look to LLPs as a means of protecting themselves from massive negligence claims.

Jill Hallpike, secretary to the Law Society's LLP working party which responded to the government consultation said, the Society was pleased that the government had decided that the regime for LLPs was to be 'no more severe than for limited companies'.

Lawyers were encouraged that the bill no longer requires partners to be held to personal guarantees for a fixed liability.According to the Department of Trade and Industry (DTI), only one in four law firms responding to the consultation exercise supported the use of guarantees to protect creditors.

Nevertheless, the DTI has retained the 'clawback' provisions which allow liquidators to require partners to repay drawings taken from a LLP two years prior to a winding up.

On this issue, the response by law firms t o the consultation was split down the middle.

The liquidator will have to prove that a partner knew a firm was insolvent or would be made insolvent by the withdrawal.Tony Williams, managing partner at Clifford Chance, a firm that has expressed great interest in establishing a LLP, said he was initially 'encouraged' by what he had seen.

'It does seem to strike a balance between the interests of the partners and that of the public interest,' he said.

Terence Kyle, managing partner of City law firm Linklaters, also said his firm would be looking closely at the bill.The DTI's consultation also revealed that the publication of accounts was one of the most opposed aspects of the trade-off between limiting liability and placing new obligations on law firms.

Two thirds of law firms responding to the consultation rejected this requirement on the ground that it would not enhance protection for creditors.

They also said the publication of accounts would give an edge to rival US firms.Mr Kyle said his firm would be looking closely at the tax implications of the bill.

While the bill proposes that LLPs will be taxed on the same basis as partnerships, Mr Kyle maintained that the overall position of a LLP was more complicated and needed close scrutiny.Alison Crawley, head of professional ethics at the Law Society, said she welcomed the LLP bill and the moderated proposals it contained, which she described as 'lightening the load' for law firms.

'We would now like to see it on the statute books as soon as possible,' she added.-- Professionals should be allowed to limit their liability contractually, a leading English solicitor said last week, reports Neil Rose.

Addressing the International Bar Association (IBA) conference in Vancouver, Giles Ridley -- a partner at City firm Slaughter and May and chairman of the IBA committee on business organisations -- said the large firms of accountants did not have unlimited liability anymore, even though it was widely assumed that they did.

'It would be better to be open [about this] and have contractual liability,' Mr Ridley said.

Any limitation should be reasonable and linked to available insurance, he added.

Law Society President Michael Mathews backed Mr Ridley's call, saying that contractual liability was 'the only option [to limit liability] which avoids a wipe-out of the firm'.

LLPs or limited liability companies just protected partners' personal assets, he maintained.

But Mr Mathews said there would be a problem 'in making it stick', as large firms would be open to claims that they were operating a cartel, as had been made recently in the case of the large firms of accountants (see [1998] Gazette, 9 September, 8).

Also at the conference, it emerged that both Germany and the Canadian province of Ontario had recently enacted LLP legislation restricting liability to partners who were either negligent themselves or supervised negligent lawyers.