Richard Desmond, the Brexit-backing media tycoon, is invoking EU law to sue the gambling regulator after it rejected his “fanciful” bid to run the national lottery, in a suit that could deprive good causes of millions of pounds.
The former owner of the Daily Express has vowed previously to seek damages from the Gambling Commission after his company Northern & Shell missed out on a 10-year contract, worth £6.5bn, to run the lottery from next year.
Desmond is expected to claim that the gambling regulator made “numerous manifest errors” during a bitter and prolonged bidding war that ended when the commission named the Czech-owned operator Allwyn as the winner.
The multimillionaire, who gave £1m to the UK Independence party (Ukip) in the run-up to the Brexit referendum, will rely partly on EU laws retained after the UK’s exit from the single-market bloc, the Guardian understands.
Sources close to Desmond told the Financial Times earlier this month that he would seek up to £200m in damages from the Gambling Commission.
He is alleging multiple flaws in the secretive auction process through which the regulator assessed his own bid and those of rivals Allwyn and Camelot, which has held the licence to run the lottery since its inception in 1994.
The commission’s chief executive, Andrew Rhodes, has previously said that any damages that the regulator is forced to pay as a result of a suit by a losing bidder for the licence might ultimately come out of lottery funding dedicated to good causes.
A source familiar with the regulator’s funding confirmed this, saying that if Desmond won his claim, the cost could in theory be borne by the exchequer but that “the reality is it would come from good causes”.
The regulator already funds the cost of fighting litigation from that pot of money.
The Conservative MP Damien Moore called on Desmond to drop the suit, which is being brought by Northern Shell and its subsidiary, the New Lottery Company.
“The National Lottery just needs to be given the space to get on with things now,” said Moore. “Of course this process is complex, but I’m tired of seeing legal challenges, which, if successful, could see wealthy businesses depriving British charities and social enterprises of hundreds of millions of pounds.
“I think it’s time we moved on, accepted the Gambling Commission’s verdict and focused on the bright future the national lottery has ahead of it.”
Desmond claims that Northern & Shell and a subsidiary, the New Lottery Company, might have performed better in the licence competition were it not for mistakes by the Gambling Commission.
The regulator is understood to have delivered a scathing assessment of Desmond’s proposals, declaring the bid “fanciful” because it scored considerably lower on essential criteria than plans lodged by Allwyn and Camelot.
The regulator argued that Desmond’s proposal scored lower in categories such as the amount of money that would be devoted to good causes and the overall business plan.
The total score would have been 57.5%, compared with Camelot’s score of 85.7% and Allwyn – the eventual winner – on 87.2%.
Desmond’s claim alleges that the commission made errors in the way it calculated the scores, did not treat all bids equally, and also failed to give him feedback on the likely success of the bid, which might have convinced him to withdraw and save costs.
Northern & Shells’s claim relies on an “obligation on the defendant [the Gambling Commission] to comply with any EU law” relating to procurement, under the terms of the UK’s 2018 EU Withdrawal Act.
A spokesperson for Northern & Shell said the company was bringing the claim “because it believes there are serious public interest questions to be answered as to how the lottery contract was awarded. As an aggrieved bidder, it has been advised that it is entitled to seek full damages.”
They said the action was “rooted in a commitment to transparency and fairness” and questioned the regulator’s dismissal of the bid as fanciful.
The spokesperson added: “The bid was supported by substantial financing from leading financial institutions, including HSBC, Barclays, and Société Générale, underscoring its seriousness.
“Northern & Shell’s action aims to uphold transparency and ensure the process is fair and honest, which is wholly in the public interest. Speculative reports on damages are outside our purview for comment.”
Camelot, owned by a Canadian pension fund called the Ontario Teachers’ Pension Plan, dropped a lawsuit attempting to overturn the licence award in September 2022, amid fury from Conservative MPs.
A separate action by Camelot, seeking damages for its loss of the contract, was in effect ended earlier this year when Allwyn bought out its erstwhile rival for £100m.
According to Desmond’s claim, he is seeking £17.5m to cover the cost of preparing his bid, as well as further unspecified damages.