Camelot ‘will vanish’ if they lose the lottery

In a last ditch attempt to overturn the decision of the Gambling Commission to award the fourth Lottery licence to a new bidder, incumbent Camelot claimed they will cease to exist if the government regulator is allowed to award the right to stage the draw to Czech-owned Allwyn Entertainment, the High Court heard.

The Gambling Commission gave the fourth national lottery licence to Allwyn earlier this year as the ‘preferred bidder’, triggering a legal challenge from Camelot UK Ltd.

The regulator insists Allwyn should be issued with the licence after it won the National Lottery licence competition in August 2020.

The regulator is applying to ‘lift the automatic suspension’ preventing the final award to Allwyn at a two day ‘balance of convenience’ hearing.

If the ban is lifted Allwyn can go ahead with its plan to take over the lottery by February 2024.

Formerly known as Sazka, Europe’s largest operator has fended off three competitors to operate the draw after battling with the Canadian owned Camelot, Italy’s Sisal and media tycoon Richard Desmond.
The company currently operates lotteries in the Czech Republic, Austria, Italy, Greece and Cyprus.

Sarah Hannaford, QC, representing the Gambling Commission, said Camelot UK was a Special Vehicle Company (SPV) set up solely to run the UK National Lottery in 1994.

‘The licence that it has entered into allows it only to carry out the UK National Lottery and ancillary activities if there is agreement,’ the barrister said.

Ms Hannaford continued: ‘On the balance of convenience, on the one hand the claimants (Camelot) want you to order that the move to the fourth licence is delayed to suit them.

‘On the other hand that involves huge compromises and risks to both my client and Allwyn.’

She said Camelot UK has suggested shorter or modified transition periods.

‘We say that is completely inappropriate, risky and unsatisfactory and we say that is not the sort of position that the court would put a defendant into.’

The necessity of a minimum 19 months transition period was said to be common ground between the parties.

Ms Hannaford said the Gambling Commission simply wants to move forward.

‘My clients say that they have carried out a procurement carefully and reached a conclusion.

‘They therefore want to move on in implementing the licence.

‘They are in my submission entitled to place the contract and that is where the balance of convenience should lie.’

She added that should the claimants’ claims be found valid, they can be ‘compensated at trial’.

Ms Hannaford argued that losing procurement, as Camelot UK has, is a ‘hazard’ of contracting with a public body such as the Gambling Commission.

‘Setting yourself up as an SPV and then saying there is an existential threat simply does not work as a matter of law in my submission,’ Ms Hannaford said.

‘Camelot UK took a decision to operate as they did and it was perfectly foreseeable that they might lose a contract.’

She said the ‘only legal loss’ to the current licence holder was a loss of profit and damages were ‘clearly’ a sufficient remedy to that loss.

Two other companies have issued claims against the Gambling Commission – Camelot Global, a group Camelot UK belongs to, and IGT, who provides the lottery tech to Camelot.

They were both sub-contractors of Camelot UK in relation to the National Lottery licence.

Both companies have allegedly claimed that they suffered or will suffer loss as a result of Camelot UK losing the UK National Lottery licence.

‘Camelot Global gets nowhere near providing cogent evidence of financial loss,’ Ms Hannaford said.

‘IGT is a massive global business and the UK lottery is frankly a very small part of it.

‘It has a lot of fingers in a lot of lottery pies.

‘There is absolutely no doubt that damages are an adequate remedy for IGT.’

The fourth National Lottery licence period begins in February 2024.
Camelot would also have to actively assist the transition to Allwyn as the operator of the fourth licence.
The Watford-based company would be expected to sue the regulator for an estimated £500m in damages – money which might have to come from the lottery’s pot for good causes.
If the stay is not lifted, the transition to the fourth licence will remain paused as the case proceeds through the courts.

This would force the government into extending the third licence and could require legislation as transition would simply not be possible in the designated time frame.

It would also see Camelot rake in profits for an extended period of time while the future of the lottery remains in limbo.

Allwyn will bring benefits to the National Lottery, the High Court heard.

Its 10 year licence will ‘revitalise investment’ and therefore generate benefits for good causes.

The winning company’s application for the fourth licence is said to have ‘maximised returns for good causes’.

Ms Hannaford said it was therefore ‘important’ that that licence comes into effect as soon as possible.

Allwyn will also introduce ‘significant changes’ to ‘make the National Lottery as attractive as possible’, the court heard.

The Gambling Commission’s lawyer referred to executive director John Tanner’s statement which said that Allwyn will bring the National Lottery up to speed with the digital era.

‘Moving into a more digitalised arena allows better capture of data and better analysis of whether people are using too frequently.

‘The third licence started in 2009 and it will have been running for a long time and the world has changed a bit.

‘The scale of changes…places constraints on the operator’s ability to respond to those changes.

‘Those changes he says are already, I quote, “overdue” and therefore he does not want to make them anymore overdue.’

The delay in fully awarding Allwyn the contract will result in harm, the court heard.

Ms Hannaford said that delay itself was harmful, as it would prevent potential benefits.

‘If we move to the fourth licence the benefit is more investment in data, marketing, new games.

‘The harm if we delay is delaying all of that.’

Additionally, the Gambling Commission is looking at launching new games and ‘reinvigorating’ existing games in the National Lottery.

‘The downside is the complete reverse, that that does not happen,’ Ms Hannaford continued.

Further, the delay may result in a ‘gap’ in the National Lottery, it is said.

‘Of course the commission very much hopes that a gap in the National Lottery would not occur but Camelot and IGT go so far as to say that is fanciful.

‘It is not fanciful because once you start messing around with transition times you are building in problems.’

Ms Hannaford went on: ‘There are risks it will go wrong but of course there are also risks that it is deeply unsatisfactory.

‘The last thing the commission wants is to have a half-baked transition and implementation.

‘Those are a compromise and will not necessarily work as well as what has been planned and agreed.

‘Not only will it not work as well as intended, it won’t reach the outcome intended either.’

Aside from potential harm to the National Lottery, the delay in awarding the contract impacts Allwyn as well, the court was told.

Ms Hannaford summarised these impacts as: ‘Failure to retain staff.

‘The risk that they won’t be able to maintain the resources needed in order to implement and enter into the fourth licence.

‘Compromised transition process leading to delay, inadequate transition.

‘Losses which are simply not covered by the revolving credit facility in the limited amount that Camelot has offered.’

Following Allwyn’s successful bid, Chairman Sir Keith Mills GBE and Justin King, Chairman Elect, released an open letter following the firm’s selection as the Preferred Applicant. It said:

‘The Gambling Commission’s decision signals a fresh start for the National Lottery; we plan to generate more money for Good Causes and the public purse, put draw-based games back at the heart of the lottery, and reverse the slide towards scratchcards and instant win games, giving due consideration to the wider societal impact these can have.’

The hearing continues.