Ruling in R v Hayes, R v Palombo [2025] UKSC 29 this week, five Justices unanimously held the trials of both men were so flawed their convictions were unsafe.
Hayes, an ex-Citigroup and UBS trader, was convicted and imprisoned in 2015 of conspiracy to defraud for manipulating the London Inter-Bank Offered Rate (Libor), which was used as a benchmark for setting loans and other financial deals. It was calculated from figures supplied by representatives from a panel of banks, including Hayes.
Palombo, the former vice president of euro rates at Barclays Bank, was convicted and imprisoned in 2019 for conspiracy to defraud by submitting false and misleading Euro Interbank Offered Rate (Euribor) figures between 2005 and 2009. These figures affected the value of financial products.
Both men’s cases were referred to the Court of Appeal by the Criminal Cases Review Commission in 2023.
Maia Cohen-Lask, partner at Corker Binning, said: ‘The judgment does not go so far as to exonerate them (indeed the judgment states that there was “ample evidence” on which a jury could have convicted).
‘However, the judgment is a comprehensive vindication of the argument Hayes and Palombo have been making for many years: that if a LIBOR / EURIBOR submission was influenced by trading advantage, it could still be a genuine and honest answer to the question posed by the definition.’
Cohen-Lask noted LIBOR has since been replaced while EURIBOR has ‘radically altered its operation, so it could be argued that remediation has already occurred.
‘In my view, the judgment will bring to an end a murky period without further light being cast through the lens of an independent inquiry.’
Business crime specialist Neil Swift, partner at Peters & Peters, explained the mistake was made by the judge when directing the jury, which ‘did as they were told. As a result of the directions, they had no option but to convict.
‘Essentially, the jury was told that if Hayes had intended submitters to put forward rates that gave him a trading advantage, that meant the rates did not represent the submitters’ genuine opinions,’ Swift said.
‘The Supreme Court noted that there was ample evidence on which a properly directed jury could have convicted Hayes. The point is that the jury was not properly directed, so the trial was unfair.
‘This will be a blow to the Serious Fraud Office (SFO) and the overall law enforcement response to the financial crisis. It may be thought that this shows that such misconduct is better examined through a regulatory rather than a criminal lens.
‘Although not capable of sending someone to prison, when it comes to the esoteric consideration of banking and financial markets, the regulatory system, with its ability to ban and fine individuals, and to do so more quickly, may be preferable.’
A spokesperson for the SFO confirmed it has carefully considered the judgment and full circumstances and will not be seeking a retrial.
Caroline Greenwell, partner, Charles Russell Speechlys, said: ‘This is a landmark ruling, by which the Supreme Court has made it clear that considering commercial interests when submitting LIBOR rates isn’t automatically dishonest or criminal.
‘The judgment brings the UK in line with the US courts, who in 2022 overturned convictions of traders on the basis that banks were permitted to factor in trading advantages when making LIBOR submissions, and confirms that the juries in Mr Hayes’ and Mr Palombo’s trials were unfairly directed by the judge that considering commercial interests in the submissions were prohibited.
‘This result not only clears Mr Hayes’ and Mr Palombo’s names, but could also lead to convictions secured in nine other criminal trials prosecuted by the Serious Fraud Office (who naturally opposed Hayes’ and Palombo’s appeals to the Supreme Court) being reviewed. Watch this space.’
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