The London Metal Exchange (LME) is being sued for allegedly ignoring environmental impacts. 

Legal action has been launched by two non-governmental organisations, the Global Legal Action Network (GLAN) and the London Mining Network, alleging that the LME has violated UK law by permitting the trading of metals produced in environmentally harmful manners on its platform.

The claim does not seek damages but aims to compel the LME to reassess its policies on which metals are allowed to be traded. 

This case comes on the heels of the LME defending itself against a lawsuit from Elliott Investment Management and Jane Street regarding the annulment of nickel trades worth billions of dollars in 2022 - a decision Elliott is currently appealing.

The suit against the LME is significant for spotlighting the exchange's pivotal role in the metals market and its gatekeeping function. 

Despite facing criticism for not banning Russian metals following Russia’s invasion of Ukraine, the LME has only implemented restrictions as mandated by international sanctions.

“Our aim is to force the LME to change the way it admits metals on its exchange,” says 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 crux of the NGOs' argument is that the LME is inadvertently handling the proceeds of crime by facilitating the trade of metals mined in violation of environmental laws. 

They have cited mining practices in countries like Indonesia, Brazil, Peru, Guinea, and Russia as problematic, suggesting that the LME's actions could be construed as dealing in the proceeds of crime under a 2002 British law.

The outcome of this legal battle could have far-reaching implications for other UK entities, including the London Stock Exchange Group, where numerous mining firms are listed. 

The LME introduced “responsible sourcing” standards in 2019, mandating producers to comply with OECD guidelines and possess ISO 14001 certifications. 

Despite these measures, the LME has been critiqued for not incorporating environmental impact assessments into its standards.

Responding to the lawsuit, the LME asserted that the claim was “misconceived”, defending its brand listing requirements as reflective of international best practices concerning ethical and sustainability issues. 

While the exchange has engaged in discussions about introducing further environmental stipulations, it highlighted the absence of a global consensus on these measures.