UPDATE 2-London Metal Exchange gets permission to appeal warehouse ruling

Thu May 15, 2014 9:12am EDT

* Judge: Grounds of appeal have "real prospect for success"

* LME taking legal advice on whether to launch an appeal (Adds comment from Rusal in paragraphs 11-12)

By Eric Onstad and Veronica Brown

LONDON, May 15 (Reuters) - The London Metal Exchange (LME) has got permission to appeal against a court ruling that halted a reform aimed at cutting backlogs at its global warehouse network.

The LME, the world's oldest and biggest market for industrial metals, said on Thursday it had not yet decided whether to actually launch an appeal to overturn the March ruling won by Russian aluminium producer Rusal.

A successful appeal could allow the exchange to carry through planned rules aimed at reducing months-long waiting times for industrial companies to gain access to metal stored in LME-approved warehouses.

"We are pleased by the decision of the Court of Appeal to grant us leave to appeal and to expedite the appeal," the LME said.

"We continue to believe that Rusal's complaint was without merit in its entirety and are conscious of the need to find a solution for the market as quickly as possible."

When asked whether the LME would appeal, spokeswoman Miriam Heywood said: "We're taking legal advice as to our next step."

A judge favoured Rusal in March, blocking the LME's efforts to change its warehouse policy because consultations had been "unfair and unlawful".

But Lord Justice Jackson of the UK Court of Appeal said in a ruling dated May 13: "In my view the grounds of appeal have a real prospect of success".

He also said the original judge's ruling "places onerous obligations on any public body conducting a consultation on complex issues in a politically sensitive area".

Loss-making Rusal filed its court action late last year to stop the reforms, due to have taken effect in April, because it was worried that they would further pressure aluminium prices.

Rusal was unhappy about the prospect of a possible appeal, but said on Thursday it was confident the original decision would be upheld.

"The company regrets that the LME has decided to seek permission to pursue further legal proceedings, rather than to acknowledge and correct the specific deficiencies identified in the judgment," the Russian group said.

The LME, owned by Hong Kong Exchanges and Clearing Ltd , oversees warehouses where companies that buy metals such as aluminium or copper on its futures market can take delivery of quality-assured supplies if needed.

Big banks and traders that own the warehouses and charge rent have profited from letting long queues build up for buyers to withdraw metal. Some also keep huge stocks of aluminium tied up, unavailable to manufacturers, in long-term financing deals.

The backlog has kept the cost high for obtaining physical aluminium, even though the world is awash with supply. In a bid to appease industrial consumers, the LME moved last year to implement reforms that would cut the queues to a maximum of 50 days.

The LME released new data this week showing that wait times to get metal out of warehouse firms owned by trade house Glencore and bank Goldman Sachs stretch up to two years. (Additional reporting by Polina Devitt in Moscow; Editing by Jane Baird and Erica Billingham)