Elliott Associates LP & Anor, R (on the application of) v The London Metal Exchange & Anor

A contractual context does not dilute ordinary public law controls on an exchange’s regulatory decisions. Suspension and cancellation are distinct powers, and cancellation requires exceptional circumstances. In an urgent market crisis, an expert exchange may reasonably find trading disorderly from extreme price movements without investigating their precise cause or start time. A clearing house may reject a margining option that would leave it under-collateralised and in breach of the UK European Market Infrastructure Regulation. Procedural fairness is determined by the court, but representations may be impractical where delay threatens market stability. Rights expressly subject to lawful cancellation are not interfered with when that power is lawfully exercised. Any interference would, in any event, have been proportionate under A1P1.

Elliott, experienced commodity traders but non-members of the London Metal Exchange, entered into nickel trades during an unprecedented price spike. Before the clearing and matching process was complete, the LME suspended nickel trading and cancelled trades executed after midnight. Elliott sought judicial review and damages for alleged breach of A1P1.

The Divisional Court held that the defendants had acted lawfully and that Elliott had no possession protected by A1P1: [2023] EWHC 2969 (Admin). The appeal concerned the contractual context, the LME’s cancellation power, procedural fairness, rationality, the duty to investigate, and whether Elliott’s contractual expectations were possessions whose cancellation was unlawful or unjustified.

1. Appeal dismissed unanimously. The contractual context did not dilute the ordinary principles of public law. Elliott’s agreement to trade subject to the LME Rules did not authorise unlawful decision-making. The approach in Bradley v Jockey Club was accepted.
2. Cancellation power. TR 22 and the legislation derived from Article 48(5) of Directive 2014/65/EU on Markets in Financial Instruments treated suspension and cancellation as separate questions. Cancellation was available only in exceptional circumstances. The extreme and unprecedented price movement fell within the paradigm case contemplated by the regulatory regime. RTS 7 concerned algorithmic trading and malfunction-related cancellation policies, not the exhaustive circumstances in which TR 22 could be used. TR 13 concerned erroneous trades and did not limit TR 22. No additional published policy was required.
3. Fairness and investigation. The court itself had to determine what procedural fairness required, applying Osborn v Parole Board and Bank Mellat (No. 2). An open consultation would have been impractical because LME Clear risked under-collateralisation, uncertainty continued in other markets, and delay could destabilise the market. The suspension notice gave warning and provided a route for concerns to be raised. The Tameside duty required only reasonable inquiries. The extreme price movement and absence of any rational macroeconomic or geopolitical explanation were sufficient. Further investigation of the precise cause, timing, or suspended price bands was unnecessary; knowledge of the later-established short squeeze would have confirmed disorder.
4. Rationality and purpose. Under Articles 40 and 41 of UK European Market Infrastructure Regulation, LME Clear had to estimate and collect sufficient margin. Its expert conclusion that allowing the trades to stand while using the previous closing price would leave it under-collateralised was rational. The cancellation served the market as a whole and was not an improper preference for one cohort.
5. A1P1. If necessary, Elliott’s legally binding contingent agreements and enforceable expectation of completed contracts could constitute possessions. Nevertheless, any rights were always subject to lawful cancellation under TR 22. Lawful cancellation therefore involved no interference. Alternatively, it was lawful, pursued an important objective, rationally connected to preventing systemic default, and proportionate because the proposed alternative was not viable.

1. Court of Appeal (Civil Division). Appeal dismissed. The court upheld the result reached below: [2024] EWCA Civ 1168.
2. High Court, Administrative Court. The Divisional Court dismissed Elliott’s judicial review and A1P1 claims: [2023] EWHC 2969 (Admin).