The Supreme Court rights the LIBOR injustice

Supreme Court Judgment & Central Legal Errors

On 23 July 2025, the UK Supreme Court unanimously quashed the convictions of Tom Hayes and Carlo Palombo in R (Respondent) v Hayes; R (Respondent) v Palombo [2025] UKSC 29 ruling that the trial judges had misdirected juries by treating as a matter of law that trading-motivated submissions were automatically not honest or genuine assessments of the LIBOR and EURIBOR rates[1], thus removing a factual issue and critical legal defence from jury consideration. The flawed directions undermined the fairness of the trials, rendering the convictions unsafe and unsustainable.

The Supreme Court held that:

“It was wrong for the judge to direct the jury that, if the submitter took any account of the commercial interests of the bank or a trader, the rate submitted was for that reason not a genuine or honest answer to the question posed by the definitions as a matter of law.”

The effect of the judge’s misdirection was to remove this defence[2] from the jury’s consideration. The jury was told that the fact that Mr Hayes had intended trading advantage to be taken into account necessarily meant, as a matter of law, that he intended figures which were not genuine assessments of the bank’s borrowing rate to be submitted.

In effect, the trial judge was directing the jury, as a matter of law, that Mr Hayes had agreed to procure the submission of rates which, as a matter of fact, were not genuine assessments of the bank’s borrowing rate and were therefore false or misleading. The Supreme Court held:

“That usurped the jury’s function and undermined the fairness of the trial. It had the consequence that the only question left for the jury to decide was whether Mr Hayes was dishonest.”

However, it went further and stated that the question of dishonesty was prejudiced by the trial judge’s misdirection and repeated references to the legal definition that a submission which took into account trading advantage could not as a matter of law be genuine or honest, thereby fatally involving the judge in the question of determining dishonesty.

The Serious Fraud Office (“the SFO”) was criticised in the judgment for the vagueness of its case, the failure to provide proper particulars to the indictment and confusion over the question of whether the LIBOR rate setting process imposed legal duties on submitters at Panel Banks. It should be remembered that the SFO’s instruction of its expert on LIBOR who gave evidence in the trials was described by the Court of Appeal as turning into “an embarrassing debacle … given the high-profile nature of these cases”. It is noteworthy that the SFO has confirmed that it will not be seeking any retrial.

Even the Court of Appeal came in for strong criticism it its approach to earlier appeals, in particular for advancing a new basis for setting the rate – “the cheapest rate theory” – which was described as a “blind alley”. Bear in mind that the Court of Appeal had ruled against Mr Hayes on three previous occasions and this appeal would have been unlikely to have been brought but for the US decision in 2022 where the appellate courts overturned the convictions of two former Deutsche Bank traders for their part in alleged LIBOR manipulation. That decision also led to all charges against Mr Hayes being dropped in the US.

Defence Counsel Reflection: Turning Hayes’ Mis‑directions into Strategy

As defence counsel in the brokers’ trial and later in the Barclays LIBOR trial, our strategy had to navigate the headwind created by the rulings made in the Hayes’ trial.

It is fair to say that the used and unused material in the LIBOR trials ran into the millions of pages, comprising documents from the various Panel Banks, the British Bankers’ Association (the BBA) and various other institutions. The search was on to find records which showed that in fact it was well-known that the rate was very much set with commercial trading interest in mind without any concern from those that were involved in regulating or dealing with the Panel Banks.  Indeed, the very nature of the rate setting meant that it was from a range of possible rates, a point not overlooked by the Supreme Court.

This evidence was provided by records of annual visits to Panel Banks by the Bank of England as well as internal records of the BBA itself and through cross-examination of the senior manager responsible at the BBA.  It was open and uncriticised market practice.  Moreover, in the brokers’ trial, it was stressed that brokers were not traders, far less submitters and there was no evidence that the brokers had ever actually sought to influence a Panel Bank’s submission.  This was also demonstrated through detailed defence charts demonstrating the falsity of the prosecution case concerning actual rate manipulation.  In short, the brokers were not party to any agreement, less any dishonest agreement to submit improper LIBOR rates.

After a lengthy trial, all six brokers were acquitted by the jury in record time.

In the Barclays trial, it was important to stress the low-ranking, procedural nature of the role, carried out openly and in the ordinary course of work, passing on messages as instructed by those more senior in the bank.  In effect, only the submitter would know whether he was making a genuine and honest assessment of the inter-bank offered rate when entering his submission, a point ultimately endorsed by the Supreme Court.  Our client was acquitted after a re-trial.

However, the dystopian Kafkaesque nightmare did not end there.  Some of the defendants in the Barclays trial were convicted, one even pleaded guilty no doubt based upon the flawed case presented by the SFO as both investigator and prosecutor, as well as a similarly mixed bag in the Euribor trials.

Tom Hayes faced confiscation proceedings as a result of his conviction, which led to an order that he repay £850,000 obtained as a result of his offending. That order was subsequently satisfied by realisation of assets including the sale of property.

Even with the wrongs being righted by the Supreme Court some 10 years after the original conviction of Tom Hayes, much of the avoidable damage lingers, both in personal and financial terms.  Some of the injustice may be cured by claims to rectify the financial implications of the quashed convictions and further applications to quash the convictions of other defendants[3], including potentially those that pleaded guilty, but the long-term effects caused by this delay to justice must be remembered in future cases.

Broader Implications

There have been calls for a public inquiry into the broader criminal justice failings, both at the trial court and Court of Appeal levels. Points of reference could include:

1. The vagueness of the offence of common-law conspiracy to defraud,
2. The unfairness of the trials themselves and the misdirection to the jury,
3. The conflict of interest posed by the SFO’s dual role as both investigator and prosecutor and the lack of clarity in the prosecution case, and
4. The approach of the Court of Appeal to the appeals against conviction, including potential reform of the appeal mechanisms to ensure that legal errors are identified and remedied in a timely manner.

Further, the judgment could be seen as a defence of the role of jury trials, particularly in complex fraud matters, a matter now in the public eye, given the proposals suggested by Sir Brian Leveson to remove jury trial rights for defendants in these types of cases, replacing them with judge-only tribunals to ease backlogs and the lengthy wait for justice.  Does this case demonstrate the importance of proper separation of the law from fact finding, especially in cases of dishonesty?

And finally, now that the US and UK courts seem aligned, albeit under different legal regimes, what of the financial institutions themselves that paid out enormous fines for the very conduct that has effectively been debunked by this judgment?  It could be said that the defendants in the LIBOR trials were made the scapegoats for the financial crisis, the root cause of which had nothing to do with the LIBOR rate setting process, especially as not a single victim of financial loss was ever presented at trial.

David Stern

Joint Head of Business Crime & Financial Regulation at 5 St Andrew’s Hill

David is an established leading practitioner in corporate and financial crime, regulation and investigations. With over 30 years’ experience and recognized in both Chambers & Partners and the Legal 500, he has acted on some of the most high-profile cases, both in England and internationally, including LIBOR, Cum-Ex and the World Trade Center insurance case. His advice is sought on all aspects of serious allegations of financial wrongdoing, regulation and commercial dispute resolution.

James Fletcher

James practises in both civil and criminal law. He is a specialist in Asset Recovery and Proceeds of Crime work and is recognized in Chambers & Partners and the Legal 500. He represented an acquitted trader in the Barclays LIBOR trials and represented Tom Hayes in his appeal against his confiscation order.

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