Traders work on the floor of the London Metal Exchange, in London
Traders work on the floor of the London Metal Exchange, in London, Britain September 27, 2018. Reuters

A British court has granted permission for U.S.-based hedge fund Elliot Associates and Jane Street Global Trading to sue the London Metal Exchange (LME) for cancelling nickel trades in March, a court document showed.

Elliott and Jane Street are demanding damages of $456.4 million and $15.34 million respectively, after the nickel price topped a record $100,000 per tonne on March 8, prompting the LME's suspension of nickel trading and voiding of trades.

The nickel trading episode has been the biggest crisis to hit the world's oldest metals forum in decades. The LME has 28 days from Oct. 3 when the ruling was made to file its defence.

"This decision is entirely procedural and is in no way a ruling on the merits of these claims," a spokesperson for the LME said. "The LME continues to prepare its defence and we look forward to setting out our arguments in due course."

Elliott and Jane Street allege the LME acted unlawfully, breached its published policies, was disproportionate, favoured some market participants over others and violated their rights under the European Convention of Human Rights to the "peaceful enjoyment" of possessions, according to documents filed in July.

"While in my view some grounds are more arguable than others, the Claimants should be given permission to proceed on all grounds," the UK High Court said in a document dated Oct. 3.

"The documents in the case illustrate the number of legal and factual issues which arise requiring determination at a full hearing."

The document said the claim would be listed for hearing as soon as the court can accommodate it.

The LME, which is owned by Hong Kong Exchanges and Clearing, in July resisted the claims, saying unprecedented market conditions caused a "disorderly" market and that it wanted to protect stability and integrity and avoid multiple defaults.

"The action which the LME took was within its powers, and those powers were exercised fairly... At all times, the LME sought to act in the interests of the market as a whole," a spokesperson for the LME said in July.

"The LME therefore continues to consider that Elliott's and Jane Street's grounds for complaint are without merit, and the LME will defend any judicial review proceedings vigorously."

Elliott Associates declined to comment and Jane Street did not immediately respond to a request for comment.