March 21, 2023

Greater than £1bn for good causes could possibly be misplaced over a authorized motion alleging the brand new licence to run the nationwide lottery was awarded unlawfully, in line with court docket filings seen by the Observer.

Camelot, which operated the nationwide lottery for practically three many years, is searching for to reverse the choice at hand the licence to its rival Allwyn. It should go to court docket later this month in an attraction to delay the handover of the £6.4bn contract. The case threatens to embroil the lottery in its greatest controversy because it was launched in 1994 – and there may be even a danger the lottery can be suspended for the primary time in its historical past.

The Playing Fee warns in a authorized submission obtained by the Observer: “Within the worst situation, there can be a spot in service between the expiry of the third licence on 31 January 2024 and the graduation of the fourth licence. The fee anticipates there can be an total shortfall of fee to good causes of at the very least £1bn and, within the case of an interregnum, significantly extra.’

The lottery raised about £1.9bn for good causes in 2020-21. The cash raised is donated by 12 distributors, together with UK Sport, which invests funds to maximise efficiency of UK athletes within the Olympic and Paralympic video games; the Nationwide Lottery Heritage Fund; and the Nationwide Lottery Group Fund, which gives cash for meals banks.

Kevin Brennan, the Labour MP and a member of the Commons choose committee for digital, tradition, media and sport, mentioned: “Any delay within the handover of the lottery that denies cash going to good causes could be a catastrophe, significantly at a time when persons are dealing with rising hardship.

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“It could be higher for everybody if this matter was resolved rapidly and the brand new lottery operator takes over as quickly as attainable.”

Allwyn is because of take over the operating of the lottery from February 2024 however won’t have time to arrange if Camelot succeeds in its court docket attraction to delay the handover. New laws could also be required for an interim operator or the lottery might even need to be suspended.

The case will elevate the query of why the Playing Fee didn’t guarantee there was enough time in its timetable to permit for seemingly authorized challenges. It should additionally study the extremely contested scores the regulator gave to the rival bids. So far, the scores are confidential.

The battle for the fourth licence of the lottery was fiercely contested, with Czech-owned operator Allwyn pledging to rejuvenate the nationwide attracts and minimize the price of ticket costs to £1. Allwyn is a part of a lottery and expertise group headed by the Czech billionaire Karel Komárek.

Karel Komarek, head of the Czech KKCG funding group which owns new UK lottery operator Allwyn. {Photograph}: CTK/Alamy

Within the weeks main as much as the announcement, executives on the red-brick and glass headquarters of Camelot in Watford have been more and more assured they’d gained, regardless of Allwyn’s eyecatching proposals.

They have been instructed their marketing strategy, a key element of the bid, had gained extra factors than Allwyn’s. One newspaper even reported the agency was on observe to win the bid with a headline: “Camelot hits the Nationwide Lottery jackpot – once more.”

There was astonishment and anger in Watford when Allwyn was named the winner, beating three different contenders together with Camelot. Executives on the incumbent lottery operator have been baffled at how the prize had slipped from their grasp. “They understood they’d misplaced,” mentioned one supply. “They simply didn’t perceive how.”

One of many key causes that Allwyn gained was its forecast of elevating £38bn for good causes throughout the 10-year licence. By comparability, Camelot, which is owned by the Ontario Lecturers’ Pension Plan funding fund, has returned greater than £46bn to good causes over the 28 years it has run the lottery. Camelot argues that the regulator didn’t correctly consider the danger that Allwyn might not ship on its bold proposals.

A danger issue of 0% – often called the answer danger issue – was finally utilized to each bids, in line with the authorized declare within the Excessive Courtroom. Camelot argues that if the proper danger issue had been utilized, it “would have been appointed the popular applicant.”

The important thing battleground for the bid was the enterprise plans of the rival bidders, which had 5 separate sections. Camelot executives have been satisfied they’d overwhelmed Allwyn on three of the sections – video games, channels and transition – and drawn on the opposite two sections.

The particulars of a declare filed by Camelot states that the Playing Fee failed “appropriately and lawfully” to guage the bids and “dedicated manifest errors”. It desires an order setting apart the choice to nominate Allwyn as the popular applicant or damages in an quantity to be assessed.

The Playing Fee says the competitors was open, truthful and sturdy. It denies the claims towards it or any breach of its authorized obligations.

The case is because of be heard early subsequent 12 months, however Camelot is arguing that the handover to Allwyn ought to be suspended till the case is heard. A choose dominated in June the handover ought to go nonetheless forward, however Camelot will go to court docket later this month in an attraction towards that call.

If Camelot is unsuccessful in delaying the handover, it is going to search damages. The full claimed damages for Camelot and its expertise companion Worldwide Recreation Expertise could be about £600m.

A Camelot spokesperson mentioned the Playing Fee was risking a damages declare of a whole bunch of hundreds of thousands of kilos by attempting to award the licence earlier than the authorized challenges have been exhausted.

A spokesperson mentioned: “This large invoice is solely avoidable by merely ready till after the court docket ruling earlier than issuing the contract to run the nationwide lottery.

“Good causes and the taxpayer ought to by no means have been placed on the hook for a whole bunch of hundreds of thousands of kilos. Fortunately, there may be nonetheless time for the regulator to alter course, and we urge them to take action.”

An Allwyn spokesperson mentioned: “The listening to in September represents the final alternative to keep away from much more losses to good causes, on high of the harm that has already been attributable to the delay to this point. Camelot will nonetheless have its day in court docket within the new 12 months, by which we’re assured it is going to be demonstrated that the Playing Fee ran an intensive, correct and sturdy competitors.”