R (Respondent) v Hayes (Appellant); R (Respondent) v Palombo (Appellant) [2025] UKSC 29
November 7, 2025
The appellants, Tom Hayes and Carlo Palombo, were former traders at major banks. Mr Hayes was convicted on 3rd of August 2015 [before Cooke J and a jury at Southwark Crown Court] of eight counts of conspiracy to defraud, while Mr Palombo was convicted on 26th of March 2019 [before HH Judge Gledhill QC and a jury at Southwark Crown Court] on one count of conspiracy to defraud between 1st of January 2005 and 31st of December 2009.
The charges against them related to attempts to influence key benchmark rates of interest used in financial markets. In Mr Hayes’s case, the London Inter-bank Offered Rate (LIBOR); and in Mr Palombo’s case, the Euro Interbank Offered Rate (EURIBOR).
Their convictions were based on the principle that banks were prohibited from considering commercial interests when submitting benchmark rates.
Mr Hayes was sentenced to 14 years’ imprisonment, reduced to 11 years by the Court of Appeal Criminal Division (CACD) on 21st of December 2015. He served five and a half years before being released in January 2021.
Mr Palombo was sentenced to four years’ imprisonment.
The prosecution (SFO) case was that Mr Hayes had dishonestly agreed with others to submit interest rate figures used in setting LIBOR which were misleading, because they were not genuine assessments of the interest rate at which the bank submitting the rate could borrow funds and were intended to influence LIBOR for Mr Hayes’s benefit when trading in derivatives.
Mr Hayes argued that the judge had wrongly directed the jury that, as a matter of law, a submission could not be genuine or honest if the person making it had taken any account of his or the bank’s commercial interests, and that the effect of that direction was to remove from the decision of the jury a key question of fact which should have been for them, and not the judge, to decide.
The CACD (Lord Thomas of Cwmgiedd CJ, Sir Brian Leveson P and Gloster LJ) rejected that ground of appeal on 21st of December 2015. They reduced the sentence of 14 years’ imprisonment to 11 years. Mr Palombo’s appeal was rejected by the CACD on 9th of December 2020 (Fulford LJ, Cutts J and Sir Nicholas Blake). See subnom R v Bermingham [2020] EWCA Crim 1662.
The case gained renewed significance following a 2022 ruling by the United States Court of Appeals for the Second Circuit, which overturned convictions of two traders on the basis that banks were permitted to factor in trading advantages when making LIBOR submissions. The appellants argued that this judgment exposed a divergence between UK and US legal interpretations of LIBOR, raising concerns about the fairness of their convictions.
Following this development, the Criminal Cases Review Commission (CCRC) referred both convictions to the CACD on 12th of October 2023.
On 27th of March 2024, following a hearing on 14, 15 and 18th of March 2024, the CACD (Bean, Popplewell LJJ and Bryan J) dismissed both Mr Hayes and Mr Palombo’s appeals. See [2024] EWCA Crim 304. It decided that the ground of appeal relating to the judge’s misdirection should not be entertained because it did not relate to the reasons given by the CCRC for making the reference and that there was no arguable merit in that point. However, although it dismissed Mr Hayes and Mr Palombo’s appeals, it stated that it should be for the Supreme Court to decide whether a point of law it stated was one which it ought to consider. That point of law was “Whether as a matter of law upon the proper construction of the LIBOR and EURIBOR definitions:
a) If a LIBOR or EURIBOR submission was influenced by trading advantage, it was for that reason not a genuine or honest answer to the question posed by the definitions; and
(b) the submission must be an assessment of the single cheapest rate at which the panel bank, or a prime bank, respectively, could borrow at the time of submission, rather than a selection from within a range of borrowing rates.”
On 23rd of July 2024, the UK Supreme Court (UKSC) (Lord Reed PSC, Lord Stephens and Lady Simler JJSC) granted permission to appeal.
At the appeal to the UKSC, the appellants argued that the juries that convicted each of them were unfairly told that taking the bank’s commercial interest into account was prohibited. They did not pursue the argument advanced to the CCRC that related to concerns about the fairness of the convictions being exposed by the US judgment.
The UKSC heard the appeals on 26th and 27th of March 2025. It gave judgment on 23rd of July 2025.
The judgement can be found here.
The Court took the view that the answer to both questions posed by the CACD was ‘No’. The Court held that:
(i) the question posed by the LIBOR definition asked banks on the panel of banks that contributed to the setting of LIBOR to submit the rate at which the panel bank could borrow funds (in a particular currency, for a particular period) at the time of the submission; and
(ii) the question posed by the EURIBOR definition was similar, except that it asked for the rate at which a prime bank could borrow funds.
The Court held that, identifying the rate at which a bank could borrow funds at the specified time required a subjective assessment of various data sources and was a matter of opinion. Although a bank would generally be expected to borrow at the cheapest rate available, determining what that rate was typically involved selecting a figure from within a range of borrowing rates which could legitimately be regarded as a true answer to the question posed by the definition. See §§21-251.
The prosecution had stated that the appellants had agreed with others to procure or make submissions of rates which were false or misleading. Because the answer to the question posed by the LIBOR or EURIBOR definition was a matter of opinion, the submission of a rate could only be false or misleading if it did not represent the submitter’s actual opinion of the relevant borrowing rate. The Court said that was a question of fact which, in a criminal trial, was the province of the jury and not the judge to decide.
Mr Hayes had admitted that, when there was a range of potential borrowing rates, he had tried to influence submitters to put forward numbers within that range which would advantage his trading, but he denied that he had attempted or agreed with others to induce submitters to put forward rates which did not represent their genuine opinion. See §§65-74.
At Mr Hayes’s trial, the judge had directed the jury that, if any consideration had been given to whether the rate submitted would be to the commercial advantage of the bank or a trader, then, as a matter of law, the rate submitted could not for that reason be a genuine or honest answer to the question posed by the LIBOR definition. Because it was not disputed that Mr Hayes had asked submitters to put forward rates intended to advantage his trading, the judge had in effect instructed the jury, as a matter of law, that Mr Hayes had agreed to procure the submission of rates which were not genuine or honest assessments of the bank’s borrowing rate and were therefore false or misleading. The Court said that was an error on the part of the judge. The law could not dictate whether or not the answer given to the question posed by the LIBOR definition represented the submitter’s genuine opinion; nor whether Mr Hayes had intended or agreed to procure submitters to put forward rates which did not represent their genuine opinion. Those were questions of fact which should have been left to the jury to decide. As Lord Leggatt emphasised:
“Whether a submission was genuine or honest did not turn on how a court construes the LIBOR and EURIBOR definitions. It turned on the state of mind of the submitter and whether the stated opinion of the borrowing rate was one which that person actually held. That is a question of fact which, in a criminal trial, is the province of the jury and not the judge.” (para 7)
The Court did observe that the jury might well have regarded the fact that a submission was influenced by trading advantage as supporting an inference that the figure submitted was not in truth a rate at which, in the submitter’s opinion, the panel bank could borrow money at the relevant time. But it was for the jury to decide whether to draw that inference, and not for the judge to tell them they must do so because the law required it2. The court also observed that there was ample evidence on which a jury, properly directed, could have found Mr Hayes guilty of conspiracy to defraud. But the jury had not been properly directed3. The effect of the judge’s directions was to usurp the function of the jury and remove from them consideration of Mr Hayes’s defence to the allegation that he had agreed to the submission of rates which were false or misleading. That made the trial unfair and led to the conclusion that Mr Hayes’s conviction had to be quashed4. See §§125-131.
In Mr Palombo’s case, the jury directions that had been given were not open to the same degree of criticism; but they still involved the same essential error of treating a question of fact as if it were a matter of law. Compounded with other errors and ambiguities in the directions, the result was that Mr Palombo’s conviction was also unsafe and had to be quashed. See §§207-234.
No Automatic Dishonesty
The Court rejected the notion that the legal construction of regulatory definition can determine whether a benchmark submission is “genuine or honest”.
That means that prosecutors cannot shortcut an analysis of dishonesty by treating commercial considerations as automatically establishing criminal intent. Dishonesty cannot be presumed from conduct alone, regardless of how inappropriate that conduct might appear from a regulatory perspective.
As Lord Leggatt said:
“The judge was wrong to direct the jury that taking account of commercial considerations was inconsistent with honesty as a matter of law. This misdirection was fundamental to the prosecution case.” (para 161)
Regulatory Response/Enforcement
Some commentators have noted the implications the judgement will have on regulatory enforcement and the potential for a refinement of the regulatory response5.
Another commentator has observed that the truth was that, at the relevant time, LIBOR was necessarily a fiction. It should be remembered that there was a credit crisis, which meant that there was not the sort of inter-bank lending on which the LIBOR definition was predicated. As such, the notion that there was some objectively “true” or “genuine” single value that submitters could and should have provided was simply unreal. The prosecution case was founded on an irrational view of LIBOR6.
Summary
The Supreme Court’s judgment determined that whether a submission was a proper one in accordance with the LIBOR definition was properly a question of fact, and thus one for the jury and not the Judge (§102 et seq). It held the conflation of questions of law and fact were pervasive throughout the trial judges’ legal directions (§§124 and127).
The Court also highlighted that many of the errors in the case would have been identified and resolved far earlier if the prosecution had properly particularised the indictment (§§52-64 at 54-55). See also R v. Skeene and anor [2025] EWCA Crim 17
The case does provide a helpful reminder of the importance of proper consideration of what issues are properly questions of law and which are, in reality, questions of fact for a jury. In short, the Court’s judgment is that the subjective mindset of a defendant is best judged by a jury.
1“It was thus in the nature of the exercise that there would on any given day be a range —which might be narrower or wider depending on market conditions — of different rates that could reasonably be selected: the figure submitted depended on the subjective judgment of the submitter.” (para 22)
2 “It is not possible to say that, if the jury had been properly directed, they would have been
bound to return verdicts of guilty. The convictions are therefore unsafe and cannot
stand.” (para 162)
3 “In each case there was ample evidence on which a jury, properly directed, could have found the appellant guilty of conspiracy to defraud. But the jury was not properly directed.” (para 9)
4 “The jury might well have regarded the fact that a submission was influenced by trading
advantage as supporting an inference that the figure submitted was not in truth a rate at
which, in the submitter’s opinion, the bank, or a prime bank, could borrow money at the
relevant time. But it was for the jury to decide whether to draw that inference, and not for the
judge to tell them they must do so because the law required it.” (para 8)
5 “Beyond the Jury Box: How the Hayes and Palombo Decision Potentially Reshapes Market
Manipulation Law” by Sara George (Sidley Austin LPP) 13/08/25
6 “Lessons from the Supreme Court decision in Hayes & Palombo” by Simon Baker KC 2BR
Blog 25/07/25.
