As the London High Court ruled on the case between Citi and Mercuria Energy Trading last week, both parties claimed victory in the manner of two heavyweight boxers raising their arms in success after a bruising 12-round brawl.

Much of the initial press reaction was in favour of Mercuria. After all, Citi had brought the case to court in an effort to claim the entirety of a US$270mn repurchasing agreement (repo) it had made with the trader, and the judge had ostensibly rejected this claim.

However, having had the time to delve through the fine print of the court’s ruling, many experienced bods in the legal market have arrived at a different conclusion.

In his ruling, Mr Justice Phillips said: “Citi’s tender of endorsed warehouse receipts was not good delivery of metal to Mercuria.”

In other words, Citi was unable to deliver the stocks of metal which the warehouse receipts and financing were based. This is simply because the stocks don’t exist. So by trying to claim the full price of the metal, Citi was being optimistic at best.

Banks with repo programmes should take some comfort from the findings. Simmons & Simmons

“I think Citi went for the easy knockout: they went to reclaim the price, because that’s the debt. They thought that was the way out of it. But I think that was a hopeless claim. In order to get the price you have to be able to deliver. They weren’t able to deliver. They were not going to succeed on that action, which doesn’t involve damages, it’s just the debt that was due on the forward sales contracts,” Guy Hardaker, partner at Holman Fenwick Willan tells GTR.

However the framework for a future compensation package for Citi has been laid. By granting Citi the authority to terminate the master agreement on which the repos were based, the judge essentially found in favour of the bank.

“Banks with repo programmes should take some comfort from the findings, despite Mercuria not being required to pay, as many issues were decided in Citibank’s favour, demonstrating that the repo structure is robust. No doubt banks will be carefully examining the wording of their agreements in light of the detail in the judgment. In addition, the judgment shows the importance of understanding how the transfer of title is effected and the need for local and continuing due diligence and monitoring procedures,” wrote a group of partners at Simmons & Simmons in a note accompanying the verdict.

The most commonly held consensus – and one which was acknowledged by the judge – is that this is not the end. It’s likely that there will be at least one more hearing, during which it’s thought Citi will attempt to secure some form of compensation (although most legal analysts are doubtful as to whether they will secure the full amount of the loan).

Hardaker thinks that Citi will “eventually be in the money”, while Linos Choo, partner at DLA Piper, says: “Banks will be comforted by the judgment and the fact that repo transactions, as currently set up, provide sufficient sureties and safeguards for the banks, should a fraud be discovered in relation to the financed commodities.”

The market’s perception is that the bank has succeeded against the trader. Guy Hardaker, HFW

But what of the wider implications for the metals financing market? Much chatter has abounded this year of banks scaling back their lending in the sector. One of the reasons often cited is the ongoing investigation at Qingdao and the simultaneous court battle which was being acted out in London. Banks were uncertain as to how the verdict would affect the repos market and, thus, scaled back their lending.

This will undoubtedly reassure lenders that the structure of such securities are sound and should have something of a calming effect on the market. However, given that the story has been unravelling since the summer of 2014, it’s likely that banks have already taken mitigating actions in order to avoid certain risks.

“The market’s perception is that the bank has succeeded against the trader. But I know bank have been taking some efforts to take these implications into account, to try to ensure the robustness of their investments, that they would have solutions to some of the problems of this case. Particularly around who bears the risk of the fraud when the date of the fraud is unknown? In this case there’s no suggestion that either party had any inkling until the horse bolted. They’re both innocent parties, but the issue is who bears the risk of that,” Hardaker says.

One of the major issues surrounding the Qingdao scandal is its timing: it came as fears mounted over a slowdown in China. Fraudulent activity only served to hammer metals such as aluminium, iron ore and copper which are set to bear the brunt of sluggish construction and property sectors in China.

In this regard, it’s impossible to view the impact of Qingdao on metals markets in isolation: it was one of a huge raft of challenges facing the sector. The good news is, it may be one of the first to be resolved.