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Court of Appeal rejects $12 billion challenge to London Metal Exchange

07/10/24

The Court of Appeal has today handed down judgment dismissing an appeal in the case of Elliott Associates L.P. and Elliott International L.P. v London Metal Exchange and LME Clear [2024] EWCA Civ 1168.

The London Metal Exchange (“LME”) is the world’s leading centre for the trading of industrial metals, and a “recognised investment exchange” for the purposes of the Financial Services and Markets Act 2000 (“FSMA 2000”). LME Clear is the clearing house for trading on the LME.

As a recognised investment exchange, the LME benefits from a statutory immunity from claims for damages arising from the performance of its regulatory functions under FSMA 2000, subject to claims under the Human Rights Act 1998. Its conduct is also amenable to judicial review.

The Appellants – Elliott Associates L.P. and Elliott International L.P. – are a sophisticated investment group who traded on the LME’s nickel futures market on the morning of 8 March 2022. They brought judicial review proceedings challenging the decision of the London Metal Exchange to cancel US$12 billion worth of nickel futures trades that morning in response to disorderly trading conditions following the Russian invasion of Ukraine (the “Decision”). The Appellants alleged that the Decision had been ultra vires, procedurally unfair and irrational. In addition, they brought claims for damages under the Human Rights Act 1998, seeking US$471 million in lost profits for an alleged disproportionate interference with their ‘possessions’ under Article 1, Protocol 1 of the European Convention on Human Rights.

The Divisional Court dismissed the claims finding, amongst other things, that the Appellants had no possessions, since trading had been halted before they had obtained cleared derivative contracts ([2023] EWHC 2969 (Admin)). On appeal, the Court of Appeal departed from the Divisional Court in holding that the Appellants did have possessions, since they had a legitimate expectation of obtaining cleared contracts, and this had economic value. Nevertheless, the Court of Appeal dismissed the appeal on its merits, finding that the Decision had been procedurally fair, rational, proportionate and lawful.

The judgment is available here.

James McClelland KC and Alastair Richardson acted for the LME and LME Clear, instructed by Hogan Lovells International LLP. Emily MacKenzie also acted for the LME and LME Clear in the proceedings before the Divisional Court.