LONDON United Co. Rusal (UC Rusal) has filed a lawsuit claiming the London Metal Exchanges decision to implement a new warehousing policy breaches its rights under the European Convention on Human Rights, a source close to the company said.
UC Rusal claims the decision breaches its right to "the peaceful enjoyment of its possessions," as economic interests and goodwill related to a business are deemed to fall under the definition of possessions, the source said.
A judicial review, in which the LME has been named as a defendant, will be heard in the High Court of England and Wales in February or March, ahead of the implementation of the proposed rule change April 1, the source said.
UC Rusal isnt seeking financial compensation in the case, AMM sister publication Metal Bulletin has been told.
Specifically, UC Rusal is challenging the LMEs Nov. 7 decision to shorten the limit on the length of queues permitted at individual warehouse locations to 50 days from a 100-day limit proposed in July (amm.com, Nov. 7).
Moscow-based UC Rusal is also claiming the LMEs consultation process, carried out before making the decision to change warehousing policy, was "procedurally flawed," according to the source.
The company believes the LMEs decision will hinder its economic interests, as it will have a direct effect on the price at which it can sell its products.
In the judicial review, UC Rusal will try to prove the LMEs decision had effectively already been made before the consultation process began, the source said.
The company is also seeking to prove that the exchange didnt release the underlying data and reports upon which its decision was based, and that it didnt conduct any risk- or cost-benefit analysis concerning the likely effects of the change.
UC Rusal claims that the exchange gave preference to the views of the LME Warehouse Committee and took account of its own financial interests in rejecting an alternative to the rule change, the source said.
The company said the LME gave no indication during the consultation process that it was planning to reduce the queue limit further, from the original 100 days, meaning it received no comments on the possible effects of such a change, the source said.
Therefore, UC Rusal believes the LME didnt carry out a sufficient inquiry, consider relevant concerns or adopt a "rational and proportionate" decision, according to the source.
The company has agreed that the likely outcome of the rule changes will be that premiums will fall while the LME price will rise, but also believes there will be a time lag of up to three years between the fall in premiums and the rise in aluminum prices.
UC Rusal is calling for the LME decision to be quashed, which would force the exchange to carry out a new consultation process.
A version of this article was first published in AMM sister publication Metal Bulletin.