Elliott Management’s Legal Challenge Against LME Fails

In a decisive ruling, the UK Court of Appeal has confirmed the London Metal Exchange’s (LME) authority in a contentious dispute regarding the cancellation of nickel trades, effectively ending Elliott Management’s legal challenge. The court upheld a prior decision favoring the LME, which had intervened during a market crisis in March 2022.

Court Supports LME’s Crisis Management
The legal conflict traces back to March 8, 2022, when nickel prices skyrocketed past $100,000 per ton due to a severe short squeeze, causing significant market disruption. In response, the LME canceled $12 billion in trades to stabilize the situation. Elliott Management, significantly impacted by this action, claimed the LME acted improperly, alleging favoritism towards certain market participants facing large losses and arguing that the exchange overstepped its authority.

The Court of Appeal rejected these claims, asserting that the LME’s intervention was justified and necessary to protect the broader market. Lord Justice Stephen Males emphasized the potential risks of allowing the trades to stand, describing the scenario as a “death spiral” that could jeopardize the stability of the global metals market.

Legal Precedent Confirmed
This latest ruling reinforces the earlier decision from the London High Court, which dismissed Elliott’s initial lawsuit in November 2022. Additionally, trading firm Jane Street had similarly contested the LME’s actions but encountered the same unfavorable outcome. Both firms sought reparations for their losses, but the courts have consistently upheld the LME’s decisions during the crisis.

LME’s Path to Modernization
The LME welcomed the court’s affirmation, viewing it as a validation of its crisis management. Chairman John Williamson stated that the board is satisfied with the outcome, which reinforces the legality and rationale behind the LME’s actions. He also highlighted the exchange’s commitment to modernizing its operations, including reforms related to price limits and improving transparency in over-the-counter trading, to rebuild trust in the marketplace.

Elliott Management Considers Next Steps
While Elliott Management expressed disappointment with the ruling, it has not dismissed the possibility of pursuing further action. The hedge fund is currently evaluating its options in light of this significant legal setback in the metals trading sector.