‘Never Mind the Bankers’ – Henry Blaxland KC

In the conjoined appeals of R v Hayes; R v Palombo [2025] UKSC 29 Lord Legatt, giving the single judgment of the Supreme Court, delivered an excoriating critique of the trial and appeal process, which led to the convictions of two men working in the banking system convicted of offences of fraud, concerning the manipulation of the LIBOR rates.

Lord Legatt set the tone in his first sentence: “The history of these two cases concerns the effectiveness of the criminal appeal system in England and Wales in confronting legal error.”

Background

By way of very brief and reductive summary, the cases concerned the operation of the banks’ system for setting interest rates, known as the London Inter Bank Offer Rate (LIBOR). Tom Hayes was a derivatives trader who had been convicted of conspiracy to defraud by influencing the setting of interest rates to suit his own commercial interests. Carlo Palombo was convicted of a similar offence in relation to EURIBOR, the European banks’ equivalent of LIBOR.

The appeals were allowed on the basis that the trial judges had wrongly determined as a matter of law the issue which went to the heart of the matter, which should have been left to the jury as a question of fact. The trial judge had ruled that, if trading advantage was taken into account in setting the interest rate, that could not as a matter of law, be a genuine or honest answer to the LIBOR question re. the correct rate.

Mr Hayes’ defence had been that he had not intended to procure LIBOR rate submitters to input figures which were not genuine assessments; he had intended only that, where there was a range of rates, which the submitter considered to be equally valid estimates, a figure at the high or low end (whichever suited Mr Hayes’ trading positions) should be submitted. Lord Legatt decided that Mr Hayes was entitled to have that defence considered by a jury and that the trial judge’s ruling had confused motive with intent. The judgment is particularly critical of the failure of no less than five different constitutions of the Court of Appeal to rectify the judge’s legal error.

The final appeal had been on a reference by the Criminal Cases Review Commission, which followed a judgment in an American federal court overturning the convictions of traders in more or less identical circumstances. The Court of Appeal had rejected reliance placed on the American judgment, but Lord Legatt in effect upheld it. Following the judgment, the free-sheet City AM headlined the story under the heading ‘Horrendous Miscarriage of Justice’. Although that was a quote from Tom Hayes’ solicitor Karen Todner, it is an entirely appropriate description of the fundamental failure of the legal process which led to the convictions.

LIBOR Trial – Southwark Crown Court

Following Tom Hayes’ conviction, a trial was held at Southwark Crown Court of six brokers accused of conspiring with him to influence LIBOR rate submitters. I was leading counsel for the first defendant Darrell Read. His defence was that Tom Hayes was a major client of his and he needed to make him believe that he would be able to play a part in influencing the LIBOR submitters, but in fact did not. But, as part of his defence, we submitted that the trial was both unjust and unfair.

It was unjust because the LIBOR system was fundamentally broken, the Bank of England itself was complicit in ‘lowballing’ (influencing submitters to submit low rates in order not to send out a message that the banks were in financial difficulty) and the prosecution had been brought in order to protect the reputation of the City of London.

It was unfair because the brokers were simply doing their job and had been scapegoated in a pretence that the problems with LIBOR were down to a few rotten apples, whereas it was the barrel itself which was rotten to the core. After a three-month trial, the jury acquitted all defendants within 24 hours of retiring.

Bankers, traders, and those associated with them able to command incomes far above what most people earn by practicing at the heart of the financial casino that is the City of London, may not garner the sympathy accorded to Post Office masters and mistresses, victims of a cruel and dishonest system, but the injustice undergone by Tom Hayes is no less egregious.

He was sentenced to 14 years imprisonment (reduced to 11 years on appeal) for engaging in a practice which was inevitably widespread within the world of banking, based as it was on the artificial division between the banks’ commercial practice as lenders and their involvement in trading in financial instruments. The LIBOR prosecutions were a misuse of prosecutorial power.

Implications of the Supreme Court Judgment

The Supreme Court judgment is remarkable in its preparedness to tackle head-on the elementary problem with the trial judge’s approach to the issue at the heart of the case. The convictions were quashed on the basis that, had the juries been properly directed, it was impossible to say that they would have been bound to convict.

And that leads to the next issue raised by this case. If the recommendations of the Leveson Review were to be implemented neither of the appellants nor anyone charged with LIBOR rigging would be entitled to trial by jury. But the acquittals in the brokers’ trial show very clearly why trial by jury is so important in cases such as these. Given the approach of the trial judge in Mr Hayes’ case, no doubt all those in his position and associated with him would have been convicted if tried by judge alone.

Hopefully, the Supreme Court’s judgment in this case will be taken into account when the government decides whether to adopt Sir Brian Leveson’s recommendations, which would, if implemented, drive a coach and horses through the constitutional protection provided by the right to trial by jury for all serious offences.

Henry Blaxland KC
Henry has practised in criminal defence work for his entire career at the Bar and has appeared in many high-profile homicide trials at the Old Bailey. His principal areas of work comprise fraud, with a specialism in confiscation, and terrorist cases with an international dimension. He is widely known for his appellate practice, acting in cases referred to the Court of Appeal by the Criminal Cases Review Commission (CCRC).

Henry is ranked as a leading silk for Fraud & Financial Crime in the Legal 500 and Chambers & Partners 2025.