Supreme Court judgment hardly draws a line under Libor
It would be convenient to think that yesterday’s Supreme Court judgment draws a line under the years-long Libor saga. The reality is far from it.
The court decided to quash the conviction of former trader Tom Hayes of offences of conspiracy to defraud. But it did so not because there was no evidence of those offences, but because, in the court’s view, the trial was unfair.
The apparent unfairness hinged on an interpretation of what qualified as an honest definition of Libor, the rate at which London banks were able to borrow from each other.
Determining that rate would normally involve picking from a range of potential legitimate rates. But there were questions over whether the rates picked were the most faithful to the definition, or the most advantageous to traders at the bank.
At Hayes’ trial, a judge determined that any rate set that factored in such an advantage was, as a matter of law, dishonest, even if within a legitimate range. But the Supreme Court found that this ought to have been a matter for the jury, rather than for the judge.
So it’s a dispute over process that quashed the conviction. Indeed, the Supreme Court went as far as to say there was “ample evidence” that a jury could have found Hayes guilty of conspiracy to defraud, had it been “properly directed.”
Hayes’ solicitor today said there were “massive legal errors” by judges involved in the initial conviction”. But by his own admission in the trial, Hayes did try to influence Libor submitters to put forward numbers which would advantage his trading. Whether that merited having his life ruined by a lengthy prison sentence while the justice system mishandled his case is another matter.
There remain many unanswered questions. Were Hayes and others made scapegoats for much deeper systemic issues? Were banks under external pressure to “lowball” Libor to stave off a financial meltdown? A full assessment of these are needed to judge the scale of the damage to London by the fallout from the rate that bore its name. But these were questions the Supreme Court could not answer.