As the Royal Bank of Scotland (RBS) becomes the third bank to reach a settlement on Libor, a key battle is being fought behind closed doors as both the Serious Fraud Office (SFO) and the US Department of Justice (DoJ) pursue former employees of UBS for alleged manipulation of Libor.

It has once again thrown the spotlight on the Extradition Act 2003, its proposed amendment and the prospect of UK-based executives being extradited to the US for offences where arguably the proper forum for resolution of the allegations is England & Wales.

The Act, and the ease with which it allows US prosecutors to extend extra-territorial reach into the UK, has caused significant controversy since its implementation in January 2004.

The widespread public and political unease at the perceived over-reach by certain US prosecutors, and the alarming statistic that more than 98% of people indicted in the US system end up having to enter into plea bargains, seems to have contributed to the decision of the Home Secretary to change the law to allow a UK judge to determine whether extradition would be appropriate in a case where a trial might easily be brought in the UK. 

On 15 January 2013, Theresa May indicated that the so-called 'forum' amendment to the Extradition Act is to be included in the Crime and Courts Bill. Given the advanced passage of the Bill through committee, it is likely to be on the statute book by the summer.

Developments in this area should be watched very carefully and especially to see that the forum bar will include those cases that were commenced before the amendment of the Extradition Act. But given the current climate, it would be ironic if the first test of this legislation was to be a raft of bankers accused of manipulating Libor.

Previously, the SFO had declined to launch criminal investigations of the individuals involved. That changed when the Financial Services Authority (FSA) published on 27 June 2012, within their final notice, excerpts of emails sent between the Barclays traders.

On 2 July, the SFO announced that "it had been working closely with the FSA", and the SFO is considering whether it is "both appropriate and possible to bring criminal prosecutions".

Following the promise of funds to be provided on an ad hoc basis, the SFO felt confident to announce (after a short period of consideration) on 6 July that it had accepted Libor for criminal prosecution.

The SFO made its first public move on 11 December, when it announced that it had executed search warrants at three homes, arrested and interviewed three men in connection with the Libor manipulation. The men are all British nationals living in the UK and none have been charged to date.

On 19 December, it was announced that Swiss banking giant UBS had entered into a deferred prosecution agreement with the DoJ. Simultaneously, the FSA in fining UBS described the manipulation as "considerably more serious" than that of Barclays, encompassing collusion with inter-dealer brokers and other banks.

The DoJ also announced that two former executives of UBS in Japan were to be charged with criminal conspiracy, wire fraud and price fixing. One of these individuals, Thomas Hayes, was one of the men arrested by the SFO the previous week.

The US charging document, which had been held under seal, was dated 12 December – the day after the SFO had arrested Hayes. The DoJ has stated its intention to extradite him.

The SFO has previously said that it "is aware of investigations in other jurisdictions and is working with the relevant authorities". It therefore seems unthinkable that the SFO did not know about the DoJ's desire to charge Hayes and yet it decided to move anyway to arrest him.

This creates a somewhat Kafkaesque situation for Hayes. He is now wanted in two jurisdictions, where the investigations are to a large extent being driven by political decisions made behind closed doors and out of his hands. The SFO is also in an unenviable position. There has been, and remains, huge political and public pressure on it to bring Libor-related charges.

It has not yet done so, and without the DoJ's range of enforcement tools, intimidating sentencing powers and all but unlimited resources, it will find bringing a successful prosecution far more demanding. If the SFO decides to charge Hayes, a drawn-out extradition process to the US would be avoided, but at what political cost?

For its part, the DoJ may well be persistent. It can use official, as well as unofficial, channels to insist that the SFO should not prosecute Hayes.

It may say that its investigation is more advanced; that there is a public interest for these offences to be heard in the US; and that but for the investigative work of the US authorities the Libor scandal would have remained uncovered.

Additionally, there is a strong belief in US quarters that the UK authorities are years behind the US in prosecuting corporate crime as evidenced by the SFO and FSA's response in dealing with Libor.

To add some further spice to the mix, the new forum bar to the Extradition Act is likely to become law during the currency of any extradition proceedings commenced from here on in, and so could well have a part to play in the decision-making process.

Forum bar or not, the last thing an individual would want is to be forced to remain, in effect, a prisoner in the UK while the DoJ remains committed to extradition. Engagement therefore with both the SFO and the DoJ – as difficult as that sounds – will be crucial.

Paul Garlick QC is a member of Furnival Chambers. David Bermingham runs his own consultancy firm, DB Strategic Consulting, and was extradited as part of the 'Natwest Three' banker case. Tim Harris is a solicitor at Bark & Co.