Rusal secures judicial review victory over London Metal Exchange

Macfarlanes has helped steer Russian metals giant Rusal to a judicial review victory in the High Court over the London Metal Exchange (LME).

In a judgment handed down yesterday (27 March) Mr Justice Phillips found in favour of Rusal in a spat with the LME over new rules governing metals warehouses.

Rusal challenged the way the rule, which concerns the links between the amount of metal a company could ‘load-in’ and ‘load-out’ of a warehouse, had been implemented. It said the rule would lead to a fall in the price of aluminium, and that the LME should have consulted over alternative options, notably banning warehouses from charging rent for the period metal is held in a queue for delivery.

The company also claimed that the new rule was a breach of its human rights, “being a disproportionate interference with Rusal’s right to peaceful enjoyment of its possessions (namely, its goodwill or economic interests)”.

Rusal’s application for permission to bring judicial review, and the substantive hearing, were heard together in a “rolled-up” process. Phillips J granted permission for judicial review on all three grounds, and agreed with Rusal that the LME’s consultation was “unfair and unlawful”. He did not rule on the human rights issue, saying it was “not necessary or useful” to consider that “interesting but difficult question”.

While upholding Rusal’s claim, Phillips J did find for LME on some points, including discarding Rusal’s argument that the exchange had been biaised in the way it consulted and implemented the new rule.

The Russian company turned to Macfarlanes partner Simon Nurney and senior counsel James Popperwell, alongside regular advisers Egorov Puginsky Afanasiev & Partners to bring the claim. Egorov Puginsky chairman Dimitry Afanasiev and partner Robin Wittering led the firm’s work on the case.

Bryan Cave partner Paul Hauser was also involved for Rusal.

Blackstone Chambers was the only set involved in the judicial review. Monica Carss-Frisk QC and James Segan appeared for Rusal, while Michael Beloff QC and Simon Pritchard were instructed for the LME by Latham & Watkins partner Omar Shah.

Rusal CEO Oleg Deripaska said in a statement: “We welcome this decision by the High Court and look forward to working closely with the LME, and indeed all key stakeholders, to ensure that the revised consultation period and subsequent rule changes serve to increase the integrity of price discovery and transparency across the market, which we believe are the key issues continuing to face the sector.”

A statement issued by the LME said: ”The LME is disappointed with the outcome of the judicial review, and continues to believe that Rusal’s complaint was without merit.

”The LME is currently taking legal advice with regard to its available options including appeal or re-consultation.”

It said the rule would not be implemented on 1 April as planned, although other, separate measures affecting metals warehouses would come into effect.

The legal line-up:

For the claimant, the Queen (on the application of United Company Rusal)

Blackstone Chambers’ Monica Carss-Frisk QC and James Segan, instructed by Macfarlanes partner Simon Nurney and senior counsel James Popperwell; Egorov Puginsky Afanasiev & Partners’ chairman Dimitry Afanasiev and partner Robin Wittering; Bryan Cave partner Paul Hauser

For the defendant, the London Metal Exchange

Blackstone Chambers’ Michael Beloff QC and Simon Pritchard, instructed by Latham & Watkins partner Omar Shah