LONDON (Reuters) - "LICENSED TO KILL" reads a two-page newspaper advertisement, with a picture of nervous children in the back of a bicycle rickshaw decorated with a skull and crossbones.

The ad is paid for by taxi drivers and it's the latest salvo in a battle for customers pitting London's black cabs against the city's rickshaw drivers.

As authorities finally consider issuing licences for "pedicabs" after nearly a decade roaming the streets licence-free, the two sides are headed for a showdown.

In the mid-1990s a London company discovered a loophole in the Public Carriage Act that allows bicycle taxis to pick up customers without requiring a taxi licence.

Since then, the centre of the capital has become packed with rickshaws every night as bars and theatres close.

Rickshaw-rental firms say "pedicabs" are an environmentally friendly way to cover short distances in a crowded city.

But opponents, such as the rival drivers of black cabs, call rickshaws a pest clogging the streets.

"The biggest myth is that these things are green. You get a rickshaw with a drunk in the back. Then you get a bus packed with passengers stuck chugging along at 5 miles an hour behind it. Somebody please tell me how that is green?" said Steve McNamara, spokesman for the Licensed Taxi Drivers Association.

Authorities estimate there are about 600 bicycle taxis on the city's streets. Taxi drivers have tried and failed in legal attempts to keep them off the streets, after courts concluded that the taxi licence laws do not apply to bikes.

Although black cab drivers say they are dangerous, so far rickshaws in London have not been involved in serious accidents. Rickshaw companies say traffic in central London moves so slowly anyway that there is little danger from a crash.

Today, Bugbug rents a fleet of about 65 rickshaws to drivers for 270 pounds a month, and also sells advertising on the sides of the vehicles. Drivers can charge what they like.

Bugbug founder Chris Smallwood says his drivers are trained, and covered with 5 million pounds of insurance. The vehicles are fitted with lights and seatbelts -- unlike those of newer firms that have since entered the market.

Smallwood hopes upcoming legislation will define "pedicabs" properly and offer licences to meet safety standards. Otherwise, the industry will go "to the lowest common denominator."

"You've got bikes with no lights, no insurance. That's not a reason to ban it. That's a reason to license it."