Fraud Trials: Floodgates Opened?

Could the Hayes & Palombo case have unintended consequences for juries in complex fraud cases, asks Maia Cohen-Lask. In the final chapter of the Libor-Euribor saga, the Supreme Court focused on the ‘essential error’ of juries being given judicial directions as to how particular definitions should be interpreted.

The Supreme Court judgment in the case of Tom Hayes and Carlo Palombo, R v Hayes; R v Palombo [2025] UKSC 29, represented the final, extraordinary chapter in the Libor-Euribor saga. In overturning their convictions—and opening the door for many similar convictions to be overturned—the Supreme Court focused on the ‘essential error’ (para [9]) of juries being given judicial directions as to how particular definitions should be interpreted. The judgment concluded that the relevant interpretations of Libor and Euribor should properly have been treated as matters of  fact, and therefore left to the jury’s consideration.

This robust statement by the Supreme Court has been welcomed by the legal community as an important reminder of the separate provinces of judges and juries. However, while this distinction  is absolutely a cornerstone of the criminal justice system, the way that the Supreme Court has expressed that division in this case risks creating confusion and difficulty in future complex fraud trials.

Matter of law

The basic principle underpinning the Supreme Court’s conclusion is that in criminal trials, the construction of documents is a matter of law for the judge to decide. However, as the judgment  points out, ‘construction’ is an ambiguous and potentially confusing way to describe the task assigned to the judge: ‘To construe a statute or a contract or any other document that has legal effect,  the judge must first understand the language in which it is expressed… But except where words have a technical legal meaning, no legal expertise is involved in this… What requires legal expertise is identifying and applying legal rules to derive from the meaning of the words, considered in their relevant context, legal propositions’ (paras [102]-[103]).

‘Construction’, in the sense of interpreting the meaning of words, is well within the ability of a layperson. To give an obvious and frequently encountered example, it falls squarely within the jury’s remit to interpret what was meant by the words contained within an email. The judge should only intervene to direct the jury when the interpretation amounts to a question of law, as described in the judgment, ‘what legal obligation a contract or other document records or creates’ (para [106]).

Moreover, even where a document creates a legal effect, the Supreme Court states that a court should only direct the jury on its construction if it is relevant to an issue in the case. In Mr Hayes’s  case, the relevant definition of Libor—in respect of which he made submissions on behalf of his employer bank—was the definition as published by the British Bankers’ Association, a UK trade
organisation.

The original trial had proceeded on the basis that this definition did not have any legal effect or create any legal obligation, and the Supreme Court approached the appeal accordingly. As a result, the judgment declared that ‘[w]hat was material was not how the court construed the Libor definition but how Mr Hayes (and other relevant individuals) had understood it. That was a matter of fact, and not law’ (para [123]).

Binary approach

While this reasoning is evidently sound, this binary approach risks creating a somewhat artificial division, which is neatly demonstrated within the judgment itself. Unlike Libor—simply a  definition published by a trade association—Euribor submissions were (and indeed, still are) submitted pursuant to a contract between each individual bank and the European Money Markets  Institute. Such a contract inevitably has a legal effect, and it was therefore found to have been appropriate for the judge to direct the jury on its meaning.

Specifically, it was appropriate for the judge to direct the jury that it was inconsistent with the (contractual) obligations of a Euribor panel bank to submit a rate which was influenced by commercial considerations. Thus, the extent of permissible jury directions would differ significantly depending on whether a trial concerned the alleged manipulation of Libor or Euribor. This appears to be an illogical result. Euribor and Libor are virtually identical benchmarks, set and used in practically the same way. Can it be right that in parallel trials, one jury would be entitled to  assistance on whether particular acts accorded with the definition and another would not, due only to the quirk of history that one is contractual and one is not?

(In the case of Mr Palombo, whose conviction was for Euribor manipulation, the Supreme Court nevertheless found a number of errors within the directions given to the jury, most notably  conflation of what amounted to a breach of the code with what amounted to a false representation. Thus, despite the legitimacy of directions on the legal effect of Euribor, his conviction was still  unsafe.)

While the seemingly irrational distinction between how juries could be directed in trials concerning Euribor or Libor is plainly one of limited practical effect, it does highlight a wider potential  issue with the limitation on jury directions for non-legal documents.

The difficulty faced by all parties in complex fraud trials is that a jury is required to assess what is dishonest by the standards of ordinary, reasonable and honest people, but by reference to  behaviour that is outside the lived experience of the vast majority of the population. This may well include concepts that most ordinary, reasonable people have never encountered. It is easy for  most people to form a view on whether an employee putting their hand in the till is dishonest behaviour, but much harder for the uninitiated to grasp whether a conversation between a trader  and broker about benchmark interest rates may or may not be dishonest. In order for them to form such an assessment, juries need help and guidance as to how unfamiliar financial markets
and the relationships within are, in theory, supposed to work.

It is not entirely clear from the Hayes judgment what degree of guidance the court would consider appropriate for juries in cases where there is no document with legal effect at the heart of the case. On a straightforward reading of the judgment, the answer would be that the jury could not, in fact, be told anything about the normal operation of complex financial markets and metrics
beyond a summary of the evidence called in the trial. No legal directions could be given as to the ‘correct’ meaning of financial definitions or operation of specific technical roles carried out by  traders.

Test for dishonesty

On the one hand, of course, allowing the jury to hear the evidence in the case and make a decision for themselves as to how things ‘should’ have worked is the proper and normal function of a jury. However, reliance on what will be conflicting evidence in relation to the operation of financial markets has implications for a jury attempting to apply the test for dishonesty.

In relation to dishonesty, the courts have repeatedly been keen to emphasise the largely objective nature of the test—ie, what are the standards of ordinary, reasonable and honest people? Arguably, for there to be a standard of an ordinary, reasonable, honest person for a jury to assess against, they need a clear indication as to how things are meant to work. To return to an earlier  example, most people know that in most circumstances, stealing from your employer is dishonest by the standards of ordinary people. That is a yardstick against which to judge the behaviour and mindset of the particular employee in the particular case they are trying.

But what should a jury use as their yardstick in the case of, say, alleged benchmark manipulation—the prosecution evidence that you should not have taken into account commercial  considerations when submitting a rate, or the defence evidence that doing so was normal commercial practice (as in the Hayes trial)? Without direction, they must simply listen to both sides and decide whose evidence they prefer, with no guidance as to what is ‘normal’ or ‘acceptable’ practice.

This is not necessarily a problem—perhaps it is time for juries to be given more freedom in complex fraud trials to interpret specialist concepts based on the evidence and without direction to assist them. But if this is the outcome, it would appear to be an unintended consequence of this Supreme Court judgment, which, it should be remembered, concerns only the specific directions given in specific trials concerning specific financial practices.

This article by no means seeks to criticise the ultimate conclusions of the Supreme Court in this case: the jury directions in Mr Hayes’s trial clearly removed crucial points from the jury’s  determination that were a matter for them, such as whether a submission that took into account commercial considerations was necessarily dishonest.

However, in righting the wrongs of these past trials, little thought has yet been given as to how it may shape the directions given in complex fraud trials of the future. In the event that judges now become particularly cautious not to overstep the bounds of their limited role in directing the jury, the floodgates may have been opened to a greater degree of jury freedom and discretion than  may have been intended by the Supreme Court.

Postscript

The above observations were written prior to David Lammy’s recent announcement of the government’s intention to remove the right to trial by jury for complex fraud trials. Plainly, in such an event, the limited role of the judiciary would be transformed into total power over the outcome of the case. Without wishing to trespass into the debate about these proposals, it is notable that the
Hayes and Palombo case is an example of the judiciary getting the law wrong, conflating concepts that should have been kept separate, and leading to unsafe convictions.

This article by Partner, Maia Cohen-Lask was first published in the New Law Journal on 12th December 2025