Wragge Lawrence Graham & Co

UK 200 2013 position: 25

Consulting on a single option — R (United Company Rusal plc) v The London Metal Exchange

In Rusal, the Administrative Court was asked to find that a decision by the London Metal Exchange (LME) to consult on a single preferred option was unfair. The challenge was one of the few that has succeeded on this basis.

The LME is the world’s premier base metals market. It operates futures and options markets in 11 industrial base metals, including aluminium. Under the Financial Services and Markets Act 2000, the LME has a responsibility to uphold standards on its exchange, including setting rules and procedures to provide for fair and orderly trading, as well as securing the timely discharge of the rights and liabilities of parties to transactions effected on the exchange.

The LME wished to address the problem of increased wait times (or queues) for delivery of aluminium from the approved warehouses in which it was stored. These queues resulted from a fall in demand after the 2008 crash, which, together with people using metals to hedge against exposure to financial products, led to increased accumulation of aluminium stocks. The queues denied owners reasonable access to their metal, undermined the role of the LME as a market of last resort and involved increased rent payable to the warehouse owners. They also had an impact on the pricing of aluminium on its exchange as against the price obtainable on the open market…

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