Court of Appeal supports LME warehouse loading decision

The UK Court of Appeal has overturned the High Court judgment of 27 March 2014 which ruled that the London Metal Exchange's (LME) original consultation and subsequent proposed rule change on how much metal a company can load in and out of a warehouse was unlawful.

In a case brought by Russian aluminium producer Rusal, it was alleged that the LME had not properly consulted over alternatives to the rule on how much metal a company can load in and out of a warehouse - the ability to control volumes released onto the metals markets from LME warehouse affects the price of aluminium. The High Court supported Rusal's claim but the LME was given leave to appeal.

The 8 October ruling from the Court of Appeal has now resulted in a statement from Rusal that it will seek permission to appeal to the Supreme Court.

A statement on Rusal's website notes that because of the change in the aluminium market, the LME's rule change, if now adopted is likely to have little effect on queues or premiums. "This is because, as a consequence of recent production cuts, the market is no longer in surplus but rather in deficit".

Commenting on the ruling, Oleg Deripaska, CEO of Rusal said: "The reducing trend in aluminium stocks and the recent rise in the aluminium price is to be welcomed and demonstrates improving sector fundamentals, factors that Rusal alluded to in its initial submission to the consultation in 2013."

He continued: "Rusal had urged the LME during the initial consultation period to delay its proposed rule change and to release more data to the market so as to allow participants to make a proper assessment of its adequacy and impact. The LME declined to do so, either at that time or in the intervening period between the decision of Mr Justice Phillips and today's Court of Appeal judgment. Accordingly, that judgment will do little to address the problems caused by disparities between the LME price and premiums or the general lack of transparency.

"Rusal will continue to seek increased transparency in this important market."

Clarissa Dann is the editor of Trade and Forfaiting Review