The National Lottery Case: Lessons for Interested Parties

As a public procurement law case, the National Lottery litigation raised a “raft of points of principle” and involved “astronomic” financial value. Unsurprisingly, it has attracted great attention in legal circles. Its latest twists (see here and here) offer really valuable learning points about the limitations and financial risks of procurement litigation for non-core participants in a tender process (e.g., sub-contractors disappointed to miss out on a valuable opportunity via an unsuccessful bidder) and interested parties (e.g., successful bidders pressured into involvement by challenges against their successful tenders).

Brief background

The litigation concerned the Gambling Commission’s procurement of the £8 billion fourth licence to operate the UK’s National Lottery. The competition was governed by the Concession Contracts Regulations 2016 (the CCR).

Camelot had been the incumbent operator of the National Lottery since its inception in 1994. It was one of four bidders in the competition, the others being The New Lottery Company, Allwyn and Sisal. Camelot’s proposal involved a technology platform provided by International Game Technology (IGT). IGT was a key subcontractor for Camelot, but it was not a bidder in its own right (e.g., as a consortium member or as Camelot’s joint venture partner).

Allwyn was the successful bidder. Camelot challenged that outcome and applied for judicial review. IGT issued its own procurement challenges (but not judicial review proceedings). The litigation was strenuously fought, but Camelot abandoned its claim after it was bought by Allwyn. IGT elected to continue its claims alone.

In the absence of Camelot’s challenge, the litigation would be effectively determined by a finding that IGT, as a non-bidder, did not have standing to bring a procurement challenge. The Court agreed to try that as a preliminary issue.

Who can bring a procurement challenge?

There were six IGT claimants: (i) the parent company; (ii) a group company that withdrew its claim at an early stage; (iii) a US-based key subcontractor to Camelot; (iv) a UK-based key subcontractor to Camelot; (v) an SPV formed to bid in the competition but that ultimately did not bid; and (vi) a company that appears to have had no greater claim to involvement than (potentially) as a sub-sub-contractor to Camelot. The Court determined that none of those parties had standing to bring a procurement challenge.

Subject to appeal, it appears that only the following categories can bring procurement challenges:

• actual bidders (probably including members of bidding consortia / joint ventures); and
• candidates (economic operators that sought an invitation or were invited to bid – or, potentially, would have bid had they been properly informed of the requirements).

The following categories do not have standing:

• sub-contractors (no matter how key) and any sub-sub (etc.) contractors; and
• parent companies of actual bidders or candidates.

While the limited availability of a private law remedy to these parties is clear (for the time being), it is far from settled whether there is scope for a remedy through judicial review. It also remains to be seen whether the availability of private law remedies is ripe to be revisited after the Procurement Act (which uses a unitary concept of “supplier”) comes into force.

Can an interested party recover its litigation costs?

Having lost its claims, IGT did not contest (in principle) that it should pay some of the Gambling Commission’s costs. However, further issues arose as Allwyn also sought to recover its costs. Examples of interested parties recovering costs of participating in procurement litigation are relatively rare. The determinative principles of whether a second set of costs should be ordered are (in summary):

• The Court has a discretion to order such costs but there is no presumption that costs will be ordered, as there is with a successful claimant or defendant.
• Ordinarily, the interested party will need to show a separate issue on which it was entitled to be heard or that it had an interest that required separate representation.
• The fact that a party won the competition does not entitle it to become an interested party (and entitlement to become an interested party for some purposes does not entitle it to become an interested party for others). Further, the fact that a party becomes an interested party does not mean that it is entitled to recover its costs.
• It is unlikely that an interested party will be able to recover any costs incurred in relation to purposes other than those for which it was granted permission to be an interested party.

Ultimately, the Court ordered that Allwyn could recover costs in this case. IGT’s litigation consequently will have been extremely costly as well as ultimately fruitless.

The Court considered that Allwyn had a separate interest justifying its participation (a lot of IGT’s claim targeted Allwyn’s proposed solution rather than focussing on perceived errors in the Gambling Commission’s evaluation of Camelot’s proposed solution) and Allwyn had participated significantly akin to an additional Defendant. The Court was also influenced by the assistance it had received from Allwyn’s participation and the fact that, earlier in proceedings, IGT had sought a costs order against Allwyn.

While, generally, this outcome can be seen as an indication that the Court is well prepared to order costs in favour of an interested party if it has a genuine separate interest, there are lots of lessons to be learned about participating in litigation as an interested party and about conducting litigation where an interested party is involved.

This article was written by Andrew Walls.