Lord Rennard could attempt to sue his way back into the Liberal Democrat ranks if Nick Clegg tries to stop him rejoining the party in Parliament, the peer's legal advisor said today.
Lord Carlile said the former chief executive of the Liberal Democrats was being "lined up against a wall" and said he should not apologise given no claims against him had been proven.
He criticised Mr Clegg for rescinding a decision to allow Lord Rennard to re-take the whip in the Lords following the publication of a report into accusations of sexual harassment.
In a further development, in a statement Alistair Webster QC, who investigated the allegations, said he had recommended that Lord Rennard should apologise to the women involved as a matter of "common manners".
Lord Carlile warned the row could escalate during an interview on the Sky News Murnaghan programme.
He said: "Of course we are wholly against sexual harassment but the fact is Lord Rennard has consistently denied touching women in the sexually inappropriate way that has been alleged, the inquiry by the police after seven months decided there was no case even to send to the CPS and the police thereafter had the good sense to keep quiet about it.
"Alistair Webster's report found there was an insufficient case on either the criminal or civil burden of standard of proof for the case to go forward to a panel.
"Here, we have a situation in which there has been found to be no case against Lord Rennard but he is being lined up against the wall by people who are trying to force him to apologise in a way no lawyer would advise and in which he should not apologise for all kinds of reasons.
"I was present when Lord Rennard told the Liberal Democrat chief whip in the Lords Lord Newby last Wednesday that he was returning to the whip. I was present when it was accepted, they shook hands and that was understood. Three or four days later we have a press release from the leader of the party suggesting some kind of completely arbitrary procedure which the party's rules don't provide for.
"If he has the whip removed from him in appropriate circumstances then I have absolutely no doubt that Lord Rennard will be taking formal legal advice and the matter could unfortunately end up in the public law courts - but nobody wants that to happen and I don't begin to understand why Nick Clegg has intervened after a process which has been concluded in Lord Rennard's favour."
Mr Webster said he had not published his report because of clear legal advice regarding data protection laws and redacting the details would "deprive it of any sensible context".
And he added: "The suggestion that Lord Rennard might wish to apologise was not one I envisaged as being contentious. I viewed Lord Rennard, from the weight of the evidence submitted, as being someone who would wish to apologise to those whom he had made to feel uncomfortable, even if he had done so inadvertently. I would consider it to be common manners."
Mr Webster said evidence from independent statement had helped him to a conclusion "there was credible evidence that events had occurred which had caused distress".
Earlier, it emerged that a former aide to Mr Clegg who made allegations against Lord Rennard had quit the party in protest at the outcome.
Bridget Harris, one of four party activists who made allegations against the peer, accused Mr Clegg of being reluctant to enter a row with party grandees in the Lords.
Ms Harris told The Observer that the House of Lords party "didn't have a vote on Wednesday over Rennard's reinstatement; they had a unilateral announcement by the chief whip that Rennard was being brought back, and those peers cheered".
She added: "The women and men who cheered in that group have no concept of how that looks to the outside world, in ordinary workplaces. Nick Clegg had a duty to show moral leadership. He hasn't."
Although Mr Clegg's powers were limited, she said "there's no reason he can't let it be known that Chris Rennard is still persona non grata" and let any of his allies follow him out of the party. "But he won't risk that kind of split."
Ms Harris said she gave Lib Dem leader Mr Clegg "a bit of a bollocking" after Mr Webster's conclusions were published.
"He's eating humble pie and it's 'I'm sorry, I'm sorry'. I gave him a bit of a bollocking and he said: 'There's nothing I can do, you can't imagine how frustrating it is'.
"He's the party leader, for god's sake. If he can't do anything, who can?
"But he doesn't want to go up against his peers, he doesn't want a big barney.
"He knew about all of these allegations, he knew about all of the women. But they made a calculation back when it all first surfaced that, if they said very little, then the allegations against Chris Rennard would go away. If they kept managing the women. But the women weren't the ones they should have been managing."
She said Mr Clegg's demand for an apology before the whip could be reinstated to Lord Rennard was not enough.
"Since an apology would be an admission then there would have to be sanction surely? I think he just needs to be kicked out," she said.
In an attack on the wider culture of Westminster she added: "When I worked in the whips' office I had 10 male MPs who behaved completely inappropriately to me. It's far from unusual for researchers to have their bottoms pinched and to be kissed on the lips."
It has emerged Lord Rennard, 53, considered offering a general apology to the women for any upset he had caused before he was made aware of the specific allegations which have caused a deep rift in the party.
In a comment made on Facebook the peer said he would not apologise now because it was not justified and there was the possibility of legal action.
Lord Rennard wrote: "I tried to make/consider any apology years ago, but was totally rebuffed by the complainants. One accepted then reneged! An appeal and further legal actions are threatened, so I could not apologise in any event even if justified (which it is not).
"It would damage the women and the party much more if I said any more."
A source close to the peer said: "He considered some years ago offering a general apology if he had ever caused offence in any way, but he didn't then know what the allegations were.
"Now he does know what the allegations are he denies them and therefore won't apologise."
One of the other complainants, Alison Smith, said: "Let's be clear. Any apology from Rennard would need to be sincere and specific. Nothing worse than 'I'm sorry if...'"
The women are understood to be appealing against the decision to end the disciplinary process.
A decision on Lord Rennard's future within the party could come tomorrow, when Lib Dem sources said the whip was due to be restored to him.
A number of Lib Dem members have also suggested that his refusal to apologise brings the party into disrepute - the charge that would have been levelled against him over the harassment allegations and which, if upheld, could lead to him being thrown out of the party.
If those complaints are taken up a new disciplinary process would begin, which would lead to the whip being suspended.
If not, Lord Rennard's fate could be decided by a vote of the Lib Dem group in the House of Lords.
More than 120 Lib Dem members said in a letter to the Daily Telegraph that Lord Rennard should be barred from any party body until he apologises.
The peer has indicated he will return to an elected position on the party's Federal Policy Committee now that the disciplinary process has ended.
Lib Dem Cabinet minister Danny Alexander said Lord Rennard "can't have it both ways" by claiming that the Webster review cleared him while refusing to comply with its recommendation to apologise.
"He should apologise because he wants to continue to be a member of the Liberal Democrats and this is the recommendation that's been made by the internal disciplinary process, it's as simple as that," Mr Alexander said.
"On the one hand they say the report has cleared him; on the other hand he shouldn't do what the report says. You can't have it both ways."
He told BBC1's Sunday Politics the the party's peers would have to "take a view for themselves" as they had the power to decide who had the whip.
"Nick Clegg has rightly made clear his strong view that in the light of the behaviour that's gone on, that would be inappropriate."
Lib Dem Euro MP Chris Davies played down the allegations against Lord Rennard and attacked Mr Clegg's handling of the row: "This isn't Jimmy Savile. This is touching someone's leg six years ago at a meeting through clothing. This is the equivalent of a few years ago an Italian man pinching a woman's bottom."
He told BBC Radio 4's Westminster Hour: " The whole thing has become like the Salem witch trials.
"A good man has been publicly destroyed through the media with the apparent support of Nick Clegg. It is completely out of proportion, nonsense and outrageous."