LME sued for ‘ignoring environmental impact of metals’

Feb 11, 2024 – 4.41pm

Police officers and workers stand near the site where a furnace explosion occurred in a nickel smelting plant in Indonesia. AP none

The London Metal Exchange is facing a new legal headache after a group of activists sued it for allegedly breaking UK law by allowing metals produced in environmentally damaging ways to trade on its marketplace.

Two non-governmental organisations, the Global Legal Action Network and the London Mining Network, have filed a lawsuit seeking to force the LME to change its stance on what metal is allowed to trade on its exchange.

Police officers and workers stand near the site where a furnace explosion occurred in a nickel smelting plant in Indonesia. AP none

Although they are not seeking damages, the suit means the LME faces further legal action on top of the high-profile case last year brought by Elliott Investment Management and Jane Street over the decision to cancel billions of dollars in nickel trades in 2022. The LME successfully defended itself in that case, although Elliott is appealing.

The new case highlights the growing scrutiny of the LME’s role as gatekeeper for metals producers. It has faced repeated calls to ban Russian metals from being delivered on to the exchange after the invasion of Ukraine, but has so far imposed restrictions only when required to do so by sanctions.

“Our aim is to force the LME to change the way it admits metals on its exchange,” said Stephanie Caligara, a lawyer at GLAN. “If we can have an impact at that level and cause the LME to change its policy, it may reverberate across the entire mining industry.”

The NGOs argue that the LME is breaching UK laws against handling the proceeds of crime by providing a platform for trading metals that have been produced in breach of environmental criminal law.

They point to “problematic” mining practices in Indonesia, Brazil, Peru, Guinea and Russia, arguing that handling metal that is produced in circumstances that would breach criminal law if they were to occur in the UK could be considered the proceeds of a crime under a 2002 British law.

Implications for other companies

If their claim is successful, it could have implications for other UK companies including the London Stock Exchange Group, where many mining companies are listed.

In 2019, the LME introduced standards for “responsible sourcing,” requiring that producers whose metal is traded on the exchange provide evidence that they meet Organisation for Economic Cooperation and Development guidance on supply chain due diligence. It also requires producers to hold ISO 14001 certificates, which show they have an environmental management system in place.

Last month, the LME said it would suspend approximately 10 per cent of the brands listed for trading on the exchange because they had failed to meet this requirement.

Still, the LME’s standards don’t include any requirements on the environmental impact of metal production. Through a judicial review, the NGOs are seeking to change that by persuading a judge to rule that the LME’s responsible sourcing policy is unlawful.

An LME statement said the exchange believed the claim was “misconceived.” “The LME’s brand listing requirements reflect the international consensus on best practice in respect of ethical and sustainability issues,” the spokesperson said in a statement.

While the LME has held discussions with market participants on introducing additional environmental requirements, it said there was no global consensus yet on taking further measures.

Bloomberg