London Metal Exchange Faces Legal Scrutiny Over “Dirty Metals”
A year after the nickel trading debacle, the London Metal Exchange (LME) finds itself embroiled in another controversy, this time over allegations related to the trading of "dirty metals." Two advocacy groups, the London Mining Network (LMN) and the Global Legal Action Network (GLAN), have accused the LME of breaching British anti-money laundering laws by facilitating the sale of environmentally damaging copper produced at the Grasberg mine in Indonesia. This legal challenge, described by GLAN as "a landmark case," aims to spotlight the alleged environmental harm caused by the mine's operations.
The LME, with its 147-year history, has dismissed the claims as "misconceived." However, the timing of these allegations is particularly noteworthy, coinciding with the exchange's efforts to suspend approximately 10% of its listed brands for failing to meet responsible sourcing documentation deadlines. The case does not seek financial damages or target Freeport McMoRan, the part-owner and operator of Grasberg, but rather aims to leverage the LME's regulatory status in the UK to bring attention to "environmental crime" allegations associated with Grasberg's mining activities.
Central to the contention is the "GRESIK" brand of copper, processed by PT Smelting from Grasberg concentrates, which the LMN seeks to delist from the LME to enforce stricter environmental compliance. The focus is particularly on the mine's tailings management system, accused of contaminating local water supplies in Papua, Indonesia. Despite Freeport's claims of environmental safety and risk mitigation in its sustainability report, the activist groups press for immediate action to address these environmental concerns.
The LME has been working towards enhancing its green credentials, requiring all listed brands to comply with OECD principles of responsible mineral supply chains and, recently, ISO certifications for environmental and health standards. The exchange is currently in the process of suspending brands that failed to meet the new criteria, underscoring its commitment to responsible sourcing.
This legal challenge marks a significant escalation in the campaign against environmental and social governance (ESG) standards in the mining sector. While the LME's conservative approach has been to align its policies with existing standards without extending compliance requirements upstream to mining operations, activist groups like LMN seek to push the envelope further by holding financial institutions and service providers accountable for the environmental and social impacts of the metals traded on their platforms.
