Tom Hayes and Carlo Palombo, two ex-bankers convicted of interest rate manipulation, are set to have their appeals considered by the Supreme Court amidst growing demands for justice. The manipulation of rate benchmarks Libor and Euribor led to their convictions and the convictions of 35 other traders from the City, marking a pivotal chapter in the financial landscape.
The Court of Appeal denied Hayes’ and Palombo’s request to reverse their convictions when they were released from jail in 2021. Nonetheless, prominent figures in politics, such as Sir David Davis of the Conservative Party and John McDonnell of the Labour Party, have criticised the verdict as unfair. The foundation of the convictions has also been questioned by Lord Mackay of Clashfern, a former Lord Chancellor.
What matters most is how the traders’ activities are interpreted. Important benchmarks for determining banks’ borrowing costs, Hayes and Palombo were found guilty of influencing the Libor and Euribor rates. Their legal team said that they had no malicious intent and that requesting particular rate submissions was standard practice in the business.
Whether the traders’ activities were dishonest or just business strategy is at the heart of the legal issue. Despite the Court of Appeal’s insistence that merchants ought to have offered the most affordable prices, there is still some uncertainty due to the complex interplay between market forces and contractual duties.
Conflicting opinions on the legitimacy of rate requests add another layer of complexity to the case, which is already plagued by the Serious Fraud Office’s (SFO) prosecution. The convictions have been upheld, leading to criticism and uncertainty, even though the SFO acknowledged that banks were not required to quote the lowest rates.
Some have questioned the validity of the convictions, arguing that the focus on contract law details has diverted attention away from the fundamental problem of dishonesty. An further level of difficulty is introduced by the fact that US and UK legal interpretations differ, which is especially problematic considering that a US court has reversed comparable convictions.
Both Hayes and Palombo are appealing to the Supreme Court, and the decision there will have far-reaching consequences for how the financial industry views justice in general and for their respective cases in particular. The significance of maintaining the rule of law in protecting the integrity of financial markets is highlighted by the quest of clarity and impartiality in adjudicating such complicated matters.
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