* Arbitration panel rules in SLA's favour
* SLA mulls next steps; Lloyds 'disappointed'
* SLA shares up 1.4 pct, Lloyds shares up 0.2 pct (Adds analyst reaction, share reaction, bullet points)
By Sinead Cruise and Simon Jessop
LONDON, March 19 (Reuters) - Standard Life Aberdeen said it has won a legal battle to stop Lloyds cancelling a 100 billion pound ($133 billion) investment management contract early, a decision which could cost the bank hundreds of millions of pounds in extra fees.
Lloyds had argued the 11 billion pound merger of Standard Life and Aberdeen Asset Management to form SLA in 2017 allowed it to end Aberdeen's 2014 contract to manage a large slice of its pension assets because it considered insurer Standard Life as a "material competitor".
But after a lengthy arbitration process, a tribunal ruled Lloyds was not entitled to give notice in February 2018 to terminate the deal, raising questions over the status of a new partnership with BlackRock and a wealth management tie-up with Schroders.
SLA's victory also raises the prospect that Lloyds will have to pay some or all of the 390 million pounds the asset manager would have earned under the terms of the contract due to expire in March 2022, even if it continues to transfer assets to BlackRock and Schroders.
These charges will come on top of the fees promised to the new partners.
"The ruling does not allow any right of appeal. We would expect Lloyds to have to pay compensation. This is likely to be in the order of around 300 million pounds," KBW analyst Edward Firth said in a note to clients on Tuesday.
SLA said it was considering appropriate next steps, while the prospect of a payout had lifted its shares by 1.4 percent at 0814 GMT, while Lloyds shares were up 0.2 percent.
For Lloyds, "the sums are broadly irrelevant in the context of the Group", KBW's Firth said, flagging an 'outperform' rating and 67 pence a share target price on its shares.
A spokesman for Scottish Widows said the Lloyds-owned insurer was "disappointed" with the ruling but it would press ahead with plans to transfer assets to BlackRock and Schroders.
"We will continue to work closely with Standard Life Aberdeen to ensure there is no disruption to performance or service," the spokesman said.
Lloyds awarded BlackRock a contract to manage 30 billion pounds in assets in October, to be invested using the U.S. company's index strategies in one of Europe's biggest investment contracts of last year.
Previously Lloyds said the BlackRock deal would begin after the arbitration process or when the existing contract expires. ($1 = 0.7541 pounds) (Reporting by Sinead Cruise and Simon Jessop, editing by Huw Jones and Alexander Smith)