LIBOR rigging: Difference between revisions

{{drop|H|ayes was indicted}} on the ancient [[common law]] offence of “conspiracy to defraud”. Criminal law minutiae, perhaps, but he was not charged under the Fraud Act 2006. That Act followed a Law Commission survey of the ancient criminal law of fraud which recommended ''abolishing'' common law conspiracy to defraud, because it was “unfairly uncertain, and wide enough to ''have the potential to catch behaviour that should not be criminal''”.<ref>{{plainlink|https://www.gov.uk/guidance/use-of-the-common-law-offence-of-conspiracy-to-defraud--6|Attorney General guidance to the legal profession on use of conspiracy to defraud}}, November 2012.</ref>  

Though the government accepted the general thrust of the Law Commission’s recommendations, it “decided to retain [''common law conspiracy to defraud''] for the meantime, but accepted the case for considering repeal in the longer term.” <ref>Ibid.</ref>

Being a common law offence, its ingredients are not sharply delineated — this in itself is a policy reason to to prefer statutory crimes, but anyway<ref>Shout out to my buddies in Kiwiland, by the way, where all criminal offences were codified and all residual common law crimes abolished in 1961. Good job, Kiwis!</ref> — though it seems to be along the following lines: ''there must be an agreement between persons intending to defraud someone by doing something dishonest with a likelihood of resulting loss, even if no loss eventually arises''.<ref>This is in JC’s non-expert words. Not a criminal lawyer. May be missing something.</ref>

That, the court thought, came down to whether he “deliberately disregarded the “''proper basis''” for the submission of those rates”.

The court did not dwell on what the “LIBOR Definition” meant — there’s not much to dwell on — but rather asked whether Hayes’ ''intention'' when choosing the rate to submit reflected “the bank’s genuine perception of its borrowing rate”, instructing the jury as follows:

At the time, there was plenty of righteous dudgeon about LIBOR rigging. None of it favoured Tom Hayes or his fellow inmates, who fitted a popular narrative.

{{Drop|T|he travails of}} other LIBOR submitters are interesting because of the scale of the ostensible “criminal enterprise” — we’ll come to that — but also because two of those convicted in the United States appealed in 2022. Their appeal focused on ''what the LIBOR Definition actually meant''.   

The question of law — were the submitters dishonest?<ref>The charge was wire fraud under {{Plainlink|https://www.law.cornell.edu/uscode/text/18/1343|18 U.S. Code § 1343}}:  in the JC’s nutshell, electronically communicating for the purpose of executing any scheme to defraud or obtain by false pretence. (''Double'' disclaimer: JC is neither a US lawyer nor a criminal lawyer, but it looks analogous to common law conspiracy to defraud.)</ref> — depended a great deal on matters of ''fact''. The US court took a literal reading of the LIBOR Definition:  

This led the US court to conclude that picking from a range of available rates, however motivated, ''could not be fraudulent''.   

{{Drop|B|ear in mind}} that the “legal question” to be answered here is one of criminal law, not contract: whether the nebulous ingredients of common law conspiracy to defraud were satisfied.  

The LIBOR Definition was not a statute at all, let alone a criminal one. As near as can be approximated, it formed part of a ''contract'' between the submitting banks and the BBA.  

Unlike crimes and torts, contracts do not admit of mental states or culpability. There is no ''mens rea''. You either comply with a contract, on the facts, or you don’t. One’s intention, recklessness or negligence does not come into it.<ref>Any number of tedious JC tracts refer such as[[contractual negligence|this one]]</ref>

 

But again, this same does not hold for contract. Quite the opposite: under the intellectual theory of contract the parties ''are required to be'' materially cognisant of the whole thing. That is what [[offer]] and [[acceptance]] requires: if they are not, there is no contract.   

Plainly, what a contract means is fact-dependent. It is not, purely, a matter of law. A contract testifies to the parties’ mutual understanding. It cannot, “mistakes of fact” notwithstanding, be sovereign to it.

And evidence of how ''everyone'' behaved when interacting with the LIBOR Definition will help with what a reasonable person would have understood it to mean. There can be no better indication of reasonableness than direct evidence of the behaviour of fellow [[Man on the Clapham Omnibus|passengers on the Clapham Omnibus]].