Hogan Lovells secures important victory for the London Metal Exchange

Press releases | 23 December 2022

London, 23 December 2022 – Hogan Lovells has today secured an important victory for its client the London Metal Exchange (LME).

On 23 December 2022, Adrian Beltrami KC (sitting as a Deputy Judge of the Commercial Court) handed down judgment on the application by AQR Capital Management and other investment funds which sought a Norwich Pharmacal order and/or pre-action disclosure against the London Metal Exchange (“LME”).

The application arose out of decisions taken by the LME on the 8 March 2022. In response to extreme and unprecedented disorder experienced on the market for nickel futures that morning, the LME first suspended nickel trading and secondly ensured that no trading arrangements made on the LME’s nickel market that morning prior to the suspension should result in binding contracts under the LME Rulebook.

The applicants assert that they have lost more than $95,000,000 in profits as a result of those decisions and that they are contemplating bringing proceedings against the LME.

The applicants applied for a Norwich Pharmacal order and/or pre-action disclosure, contending that they had established a good arguable case of “bad faith” on the part of the LME and seeking what the Judge characterised as “extremely broad and indeed intrusive” relief comprising “very wide-ranging disclosure” and affidavit evidence prior to any proceedings being issued.

Rejecting the application in its entirety, the Judge found that the applicants had not demonstrated a good arguable case of bad faith. In particular, the Judge found that to rely on press articles, some of which the Judge noted it appeared that AQR itself may have contributed to, would be “to shore up speculation by speculation”. The Judge considered that the LME had “provided a detailed explanation of its case about its decision making” and that he saw no inconsistency in the explanations given “which begins to support a case of bad faith”.

The judgment is available here.

The Hogan Lovells core team included Alex Sciannaca, partner, Charles Brasted, partner, Andrew Holland, senior associate, and Olivia Drawbell, trainee solicitor, instructing James McClelland KC and Emily MacKenzie at Brick Court.