Senior representatives of the Institute and the Faculty of Actuaries, the National Association of Pension Funds, the London Investment Banking Association, the Institute of Directors, the Construction Industry Council and the Building Employers Confederation have signed a petition calling on Ian Lang, president of the Board of Trade, to order an examination of the principle of joint and several liability.
This is the long-standing principle of English law under which somebody can be required to bear the whole loss of an event even if they are only partially responsible. Large firms are especially worried about it because under the laws applying to partnership, each partner is joint and severally liable for claims made against his or her partners. Accordingly, in the event of what the accountants have come to call "an Armageddon" there is the real prospect of a well-known firm being wiped out.
The petition was the not the first sign that the liability issue had moved beyond accountancy. Senior lawyers have begun muttering about it, with some firms announcing that they are considering ways of protecting themselves from the effects of potential huge claims, and last month the US investment bank Goldman Sachs said it would become a limited liability partnership at the end of the fiscal year. But it was the clearest sign yet that accountants were winning the hearts and minds of business in general.
The profession has consistently complained that it has paid the price for the perception that insurance gives its members "deep pockets". But its protests have always come over as special pleading. With the recent collapse of several companies with apparently clean audit reports, there had seemed little chance of accountants gaining any relief.
Last month's petition could help to change all that. It lends weight to suggestions that the UK's economic efficiency is being diminished by the joint and several liability law. Since the US has joined other countries in introducing proportionality into negligence claims, there is a compelling case for bringing Britain into line with the rest of the world, say leading accountants.
The accountancy profession has already had its hopes dashed once when a Law Commission feasibility study defended the current situation on the grounds that it provided protection to victims of professional negligence. But by gaining the support of other professionals, the accountancy profession has done a lot to reduce the chances of further disappointment.
Furthermore, a recent report by the Maastricht Accounting and Auditing Research Centre adds its voice to calls for proportionality in negligence claims.
Introducing legislation to help out what many consider to be a bunch of privileged folk will not be a vote-winner for any government. Coincidentally, in the same week the letter to Mr Lang was published, the Jersey legislature began to consider proposals to encourage large firms to establish limited liability partnerships on the island. The sight of accountants, lawyers, surveyors and the rest heading for the Channel to save themselves from extinction might be too much for any minister to bear.Reuse content