Challenge to “most financially significant procurement process in UK history” fails in High Court

In The New Lottery Company Limited and another v The Gambling Commission, Mrs Justice Joanna Smith rejected both claims brought by the New Lottery Company Limited (TNLC) and Northern and Shell PLC (N&S PLC), finding they had "failed to make out any case of manifest error on the part of the commission" regarding its process.

She also found the claimants failed to prove the commission had breached the Concession Contracts Regulations 2016.

The Gambling Commission awarded the contract to Allwyn in March 2022, following a two-year-long procurement process, described by the claimants as the “most financially significant procurement process in UK history”.

The claimants made two claims against the commission.

The first claim challenged the fairness and integrity of the competition process and its outcome, relying upon alleged breaches by the commission of the Concession Contracts Regulations 2016.

Summarising their argument, the judgment said: "They contend that the Commission was in manifest error in scoring TNLC as a ‘Fail’ in respect of important Pass/Fail elements of the Competition and that it was also in breach of obligations of transparency which caused or contributed to these erroneous scores.”

They contended that, if not for the alleged failures on the part of the commission, TNLC would have passed the Pass/Fail requirements.

They also contended that in light of manifest errors by the commission in the approach taken to Pass/Fail requirements for Allwyn and Camelot, those two bidders should have failed (such that it would have been impossible for either of them to win the competition), alternatively that had the commission acted properly in accordance with its duties it should have disqualified both Camelot and Allwyn from the competition.

They ultimately argued that TNLC would have won the competition and they sought damages of in excess of £1 billion in compensation for lost profits.

The second claim challenged modifications made to the agreement between the commission and Allwyn, which governs the transition to the Fourth Licence, and the Fourth Licence itself.

On this claim, the judgment said: "The Claimants allege that these modifications resulted in a contract to run the National Lottery that was significantly different from that on which TNLC made its bid in the Competition.

“They claim that these were ‘substantial’ amendments within the meaning of Regulation 43 of the CCR 2016 and/or that they were foreseeable to a reasonably diligent authority such that a new competition (which they refer to as ‘5NLC’) should have been run for the modified contract pursuant to Regulation 43(10).”

The two claimants said that TNLC would have had a real chance of winning 5NLC and they sought damages for the loss of that chance (again in excess of £1 billion), together with a declaration of ineffectiveness in respect of the modifications made in 2023.

The judge found that on the first claim, the claimants had "failed to make out any case of manifest error on the part of the commission in their process claim".

She also noted that the claim failed to establish that either Camelot or Allwyn should have been disqualified from the competition, whether by reason of incumbency advantage (Camelot) or conflict of interest (Allwyn).

"The Competition that was conducted for the award of the Fourth Licence reached a lawful outcome," it added.

Turning to the second claim, the judge found that the claimants had failed to "establish that the Commission acted in breach of Regulation 43 CCR 2016 in making the Challenged Modifications without resorting to a new concession contract award procedure".

She said that although the challenged modifications were foreseeable, "they were not substantial in that they did not change the economic balance in favour of Allwyn in a manner that was not provided for in the Competition version of the Enabling Agreement and Fourth Licence".

The judgment continued: "Even if that is wrong, the Claimants have not established that any breach has caused them to suffer a loss.

"There is no real prospect on the available evidence that TNLC would have won a 5NLC. Finally, the Modifications Claim is time-barred, such that it would have failed in any event. The Modifications Claim is also dismissed."

Responding to the decision, a spokesperson for the Gambling Commission said: “This judgment makes clear that the Gambling Commission ran a fair and robust competition to award the Fourth National Lottery Licence, and that none of the contested changes to the Licence, in the course of its implementation, were substantial or contrary to the relevant procurement regulations.

“The judgment gives resounding support to Good Causes by enabling Allwyn, with oversight from the Commission, to continue with their plans of investment in The National Lottery without further distraction. Our priority remains to continue regulating The National Lottery for the benefit of participants and Good Causes.”

Adam Carey