Last week the Court of Appeal refused to overturn the convictions of Tom Hayes and Carlo Palombo, the two ex-traders who were jailed for rigging interest rates in the LIBOR scandal. But the saga continues, as both men are putting in applications to have their appeals taken to the Supreme Court.
The ruling will be a huge relief for the SFO, which would have been placed in a very tricky position if the convictions had been overturned – not least because Tom Hayes has already served five years of his sentence. However, the question remains: was this judgement fair? Top politicians don’t think so, and agree that the Supreme Court should hear the appeal.
Will this be possible? It depends. In civil cases, the Supreme Court can pretty much pick and choose the cases it wants to take forward. This is because the appellants need permission from either the Court of Appeal or the Supreme Court for their case to be heard. Normally they would request permission from the lowest ranking court first, so if the Court of Appeal says no, the Supreme Court is left to make the decision.
But as this is a criminal case, the process is different. Before an appellant can take their case to the Supreme Court, the Court of Appeal must verify two points: firstly, that the case concerns an arguable point of law, and secondly, that the point of law in question is of general public importance.
At the heart of this case is the question around whether the traders involved in the LIBOR scandal acted dishonestly. They have always maintained that they are being singled out as the fall guys - their actions were not unusual, and senior managers were well-aware of what they were doing. The whole investigation sheds light on a difficult legal question: what is dishonesty? We also have to consider whether the wider circumstances around the wrongdoing matter, if the law was indeed broken in the first place.
In other words, the courts have to decide whether the contractual arrangements for LIBOR were broad enough to allow the traders to make submissions which didn’t reflect market rate. So far, the UK’s approach to this issue has been much harsher than other global jurisdictions – which is a big reason why many people are saying the convictions in the English courts are unfair.
To understand this, let’s take a look at why Hayes’ and Palombo’s cases were referred back to the UK courts in the first place. It was sparked by events in 2022, when two other traders convicted of LIBOR rigging in New York took their cases to the US Court of Appeal. The Court ruled that the way the LIBOR contract had been interpreted was not necessarily fraudulent or dishonest. Hayes and Palombo’s cases were subsequently taken to the UK Court of Appeal, the idea being that if the US appeal was successful, theirs should be too.
But this isn’t what happened. Why? It all boils down to who the courts relied on to interpret the LIBOR contract. In the US, it was down to the jury to decide whether the provisions within the contract justified the way it was interpreted by the traders – and the jury said yes, which is why the appeals were successful. But in English law, contractual interpretations are solely a judge’s responsibility – and the judge answered the same question with a no.
So, this is an interesting point of law surrounding whether contractual interpretations should be determined by a jury, or a judge. But is it really something of general public importance? We are yet to see.
Ultimately, the whole LIBOR investigation and subsequent court cases place a spotlight on the issues that arise when we apply criminal law to the policing of the financial market, and the challenges this creates for the SFO (on the one hand, people are saying the convictions are unfair, but if the convictions weren’t made, the SFO would have been heavily criticised for not doing anything). This shows just how difficult it is to prosecute alleged dishonesty in deeply commercial situations, when there is quite plainly an element of discretion around what activity is dishonest, and what activity isn’t.
Jonathan Fisher KC, barrister at Red Lion Court Chambers London
