“Opinion-Not-Construction” Rule for Benchmark-Fraud Cases
A Comprehensive Commentary on Hayes & Palombo ([2025] UKSC 29)

1. Introduction

The joined appeals of Tom Hayes and Carlo Palombo provided the United Kingdom Supreme Court with a rare opportunity to revisit the architecture of benchmark-manipulation prosecutions that followed the 2008 financial crisis. The appellants – originally convicted for conspiring to manipulate LIBOR (Hayes) and EURIBOR (Palombo) – argued that judges at their trials wrongly converted factual questions, meant for juries, into matters of law. The Supreme Court agreed, quashed both convictions and, in doing so, minted a new organising principle: Whether a benchmark submission is “genuine” or “honest” depends on the submitter’s subjective belief – a pure question of fact – and cannot be dictated by a court’s legal construction of benchmark documentation. This “Opinion-Not-Construction” rule will reverberate across fraud, financial-crime and jury-direction jurisprudence.

2. Summary of the Judgment

• Certified Question. The Court of Appeal asked whether, as a matter of law (i) any submission influenced by trading advantage is necessarily not “genuine or honest”, and (ii) benchmark definitions require banks to submit the single cheapest borrowing rate rather than any rate within a legitimate range.
• Answer. The Supreme Court (Lord Leggatt for a unanimous court) answered “No” to both limbs. A submission’s genuineness hinges on the submitter’s state of mind, not on a judicial interpretation of LIBOR/EURIBOR rules, and the notion that only the “cheapest” rate is permissible is a misconception.
• Misdirections. Jury directions at each appellant’s trial wrongly:
  • Equated breach of benchmark documentation with fraud;
  • Told the jury that considering trading advantage legally precluded a genuine opinion;
  • Collapsed distinct elements (false representation and dishonesty) into one.
• Outcome. Convictions quashed; far-reaching guidance issued on (a) judge/jury functions, (b) use of foreign-law contracts, and (c) limits of appellate restraint where repeated errors have ossified in lower-court precedent.

3. Analysis

3.1 Precedents Cited and Their Influence

• R v H (interlocutory appeal, 2015) and Merchant & Mathew (2017) – earlier Court of Appeal decisions that endorsed the very directions now condemned. The Supreme Court disapproved them in so far as they conflated fact with law.
• R v Adams (1994) – leading authority that the truth/falsity of a written representation is a jury question. Elevated here to constitutional significance.
• R v Spens (1991) – contrasts situations where construction of quasi-legislative codes is for the judge (Takeover Code). Hayes clarifies that such construction helps dishonesty assessments but cannot usurp factual questions of belief.
• Cozens v Brutus & Chatenay – classical statements that “meaning of words” is fact, “legal effect” is law, forming Lord Leggatt’s analytic spine.
• United States v Connolly & Black (2022, 2nd Cir.) – U.S. acquittal that triggered CCRC references. UKSC declined to import the U.S. “one-true-rate” standard but shared scepticism toward cheapest-rate absolutism.

3.2 Legal Reasoning

1. Separation of Functions. The Court re-affirmed the constitutional divide: judges decide law (including legal effect of documents); juries decide facts (including what the defendant believed and intended).
2. No Derivation of Falsity from Construction. Whether a submission is false turns solely on whether the stated opinion was actually held. That proposition remains true even if the expressed opinion breaches contractual or regulatory obligations.
3. Rejection of “Cheapest-Rate” Theory. Market reality often yields a spectrum of plausible borrowing rates. Expecting submitters to pluck the absolute nadir is both irrational and contrary to the averaging logic of benchmark design.
4. EURIBOR Code Issues. The Code is contractually binding (Belgian law) and does bar trading-advantage considerations, yet breach of that contract ≠ automatic falsity in criminal law. Jury still had to determine subjective belief.
5. Appellate Vigilance. UKSC criticised the Court of Appeal for perpetuating error through “consistent series of decisions.” Persistence of an error does not fossilise it into correctness.

3.3 Likely Impact

• Benchmark-Manipulation Cases. Existing convictions relying on identical directions (e.g. other LIBOR/EURIBOR defendants) may be re-opened.
• Fraud Prosecutions Generally. Prosecution indictments must now specify the alleged misrepresentation with precision and accept that breach of civil/contractual rules is not per se fraud.
• Judicial Directions. Trial judges must resist turning moral or professional standards into legal edicts on falsity; “state-of-mind” questions cannot be short-circuited.
• Financial Regulation. Reinforces post-2012 statutory benchmark-offence regime (Financial Services Act 2012 s.91), highlighting why Parliament felt a bespoke offence was needed.
• CCRC & Appellate Practice. Supreme Court signalled a willingness to look beyond certified points and to correct recurring errors even after multiple appellate rejections.

4. Complex Concepts Simplified

4.1 LIBOR / EURIBOR

Daily benchmark interest rates, compiled from panel-bank submissions, used to price trillions in loans and derivatives worldwide.

4.2 Conspiracy to Defraud

A common-law offence requiring (i) agreement, (ii) intent to cause economic prejudice, and (iii) dishonesty. No need for deception but typically proven via false representations.

4.3 Misrepresentation of Opinion

Stating an opinion you do not actually hold is a false statement of fact (about your state of mind). Criminal fraud hinges on that dishonesty, not on breach of external rules.

4.4 “Construction” vs “Meaning”

• Meaning – ordinary linguistic sense; jury question if relevant to honesty/falsity.
• Construction – legal effect of a document; judge question (e.g. what rights/duties it creates).

4.5 Cheapest-Rate Myth

Assumes there is a single correct borrowing rate each day. Rejected because real-world liquidity gaps mean several rates are equally plausible.

4.6 Criminal Cases Review Commission (CCRC)

Routes potential miscarriages of justice back to the Court of Appeal. UKSC confirmed it can entertain grounds beyond the CCRC’s stated reasons when justice so requires.

5. Conclusion

Hayes & Palombo redraws the boundary lines for fraud prosecutions in complex financial settings. The Court’s core message is deceptively simple: fact-finding belongs to the jury. When prosecutors allege a submission is “not genuine”, they must persuade jurors that the submitter lied about his opinion; judges must not declare, as a matter of law, that certain motives (trading advantage) automatically negate genuineness. The ruling also restores nuance to market practice, discarding the unrealistic “one cheapest rate” standard.

Beyond benchmark cases, the decision strengthens the integrity of the jury system, mandates precision in drafting indictments, and reminds appellate courts to remain alert to doctrinal drift. Future trials will now pivot on hard evidence of state of mind – recorded chats, emails and testimony – rather than abstract interpretations of industry codes. That recalibration, the Court hopes, will deliver fairer trials and more robust convictions where deserved.