* Ruling could come as early as Wednesday after hearing ends
* Appeal hearing is over consultation, not warehouse reform
* Rusal says market conditions mean rules to have little
By Eric Onstad and Alexandra Reza
LONDON, July 29 The London Metal Exchange (LME)
and Russian aluminium giant Rusal sparred in court on
Tuesday as the LME sought to overturn a court ruling and allow
it to implement tough warehousing rules to cut backlogs.
The dispute is over whether the LME, the world's oldest and
biggest market for industrial metals, should have to launch a
fresh consultation after a March court ruling labelled its
original process as "unfair and unlawful".
The proposed warehouse rules - designed to speed up
deliveries of metal from depots in the LME's global network -
were not at issue in the original ruling.
"The LME makes great play of the fact that the judge did not
hold that the proposal in itself was irrational," Rusal's legal
team led by Monica Carss-Frisk said in written arguments on the
first of two days of hearings before a panel of three Appeal
"That is not, however, the test. The test is one of
Rusal argued that the original judge was right to say that
the LME was unfair by excluding the option of capping warehouse
rents in its consultation. Tuesday's arguments were heavy with
legal precedents about the duties of public organisations.
The LME reforms, originally due to take force in April,
aimed to make owners of warehouses deliver out at least as much
metal as they take in.
Industrial buyers of aluminium, used in transport and to
make beverage cans, have to wait up to two years to get delivery
of metal from some LME warehouses and the new rules aimed to cut
the queues down to a maximum of 50 days.
The exchange, owned by Hong Kong Exchanges and Clearing Ltd
, told Tuesday's hearing that Rusal had not brought up
the issue of rental caps at warehouses during the consultation
Michael Beloff, acting for the LME, said that the Russian
company was using that issue to stop the reforms because it was
worried that they would depress prices.
Benchmark aluminium prices on the LME have slid 30
percent since touching a peak in May 2011 due to overproduction
Rusal said in a separate briefing document that due to
changes in the supply-demand balance, the LME's proposed changes
would have scant impact on warehouse queues.
"Such market conditions demonstrate that the rule would have
little or no impact at all, rendering the rule largely
irrelevant and ineffective in the current circumstances," the
Rusal document said.
Rusal says the aluminium market has moved into a substantial
deficit due to cutbacks by producers after years of surpluses.
A ruling in the Appeal Court could come as early as the
conclusion of the hearing on Wednesday, but the panel could also
decide to reserve judgment to take time to consider the
arguments, according to the court's website.
(Editing by Keiron Henderson)