US firm Cadwalader Wickersham & Taft has ended its work for Parmalat bondholders and is instead working on the troubled Italian company's provisional liquidation - apparently changing the Chinese-wall approach it applied in the TXU insolvency.

Cadwalader acted for US insurance companies Jefferson-Pilot Life, Monumental Life, New York Life Insurance and Annuity, Principal Life, Transamerica Occidental Life and Transamerica Life - all noteholders of Cayman Islands-based Parmalat companies.

After successfully obtaining a provisional liquidation order on behalf of these noteholders last month in the Cayman Islands, Cadwalader accepted instructions from the provisional liquidator, Ernst & Young.

Asked by the Gazette last week whether it continued to act for the noteholders and the provisional liquidator, a spokeswoman for the firm in New York said: 'Our work on behalf of the bondholders is complete.'

She refused to expand on the reasons, but the decision indicates a different approach to that seen in the TXU insolvency last year, in which Allen & Overy and Cadwallader controversially advised both creditors and administrators of the failed power group.

Then, Ernst & Young - TXU's joint administrator, advised by City firm Herbert Smith - challenged the position of the advisers, who obtained a High Court-stamped agreement to use internal information barriers, or Chinese walls.

David Gold, head of litigation at Herbert Smith, who last year warned against the use of Chinese walls, said: 'It looks as though Cadwalader has taken to heart the TXU message and are positioning themselves to to avoid any potential future challenge to their representation on the basis of conflict.'

One senior City lawyer - also involved in the Parmalat insolvency - who preferred not to be named, said: 'Everyone acting on Parmalat is watching very closely for conflicts because there are huge possibilities for getting caught out by them.'

US firm Bingham McCutcheon is now acting for the noteholders.

Jeremy Fleming