The billionaire media mogul Richard Desmond has urged a court to “err on the side of generosity” in assessing a £1.3bn damages claim against the Gambling Commission that would probably have to be funded by taxpayers if he wins.
Companies owned by the former proprietor of the Daily Express and Channel 5 are suing the gambling regulator in a bitter dispute that opened at the high court on Thursday.
Lawyers for Desmond’s Northern & Shell investment company and his lottery bid vehicle, the New Lottery Company (TNLC), argue the commission made “manifest errors” in the labyrinthine competition process for Britain’s largest public sector contract.
Allwyn, a new vehicle ultimately owned by the Czech billionaire Karel Komárek, won the 10-year licence in 2022 and has run the draw since 2024.
At the high court, lawyers for Desmond’s companies told Mrs Justice Smith that the bid competition itself was flawed, for multiple reasons, and said the process should have been rerun because the contract was changed after it was awarded.
The Dubai-based billionaire is seeking damages of up to £1.3bn. If he wins it could have a significant cost for charities and the taxpayer because any payout would have to come from a lottery pot of money set aside to fund good causes.
If the payout is larger than the fund, which is understood to receive about £30m a week from lottery ticket sales, the taxpayer would have to foot the bill.
In documents submitted to the court, Desmond’s lawyers said case law dictated that Smith should “err if anything on the side of the claimant” when awarding damages, if she determined the regulator was at fault for any uncertainty about what would have happened had the contract been run differently.
The regulator has defended its process as robust. It has argued in legal submissions that Desmond’s bid was “fanciful” and scored “extremely badly” in a rigorous competition process.
Sarah Hannaford KC, acting for the regulator, said Desmond’s claim – for up to £1.3bn in damages for earnings TNLC could make if it won a renewed competition process – was “hopeless”.
She said it was “extremely unusual, if not unique, for a bidder who lost so spectacularly to argue that it should have won”.
She added it was “wishful thinking” for TNLC to claim it could have won if it had received better feedback from the regulator on the quality of its bid at an early stage of the competition. The company claims the Gambling Commission did provide feedback to Allwyn at a point in the process when it should not have done, claiming this was a “very serious breach” of the competition’s rules.
Allwyn is also a party to the case, in effect on the commission’s side, on the basis that its reputation would suffer if Desmond’s lawyers succeeded in convincing the judge that it should not have won the bidding process.
Among the arguments put forward by the billionaire is a claim that Allwyn was not a suitable operator for the lottery. First, lawyers pointed to the fact that Komárek’s investment vehicle, KKCG, had a joint venture with the Russian state-owned energy firm Gazprom. They also said that two people “connected” to Allwyn had disclosed ties to a financial services firm that was fined by the Czech regulator for market manipulation and making false statements to market.
Daniel Toledano KC, for Northern & Shell and TNLC, said: “Neither of those matters was investigated properly or at all by the GC.”
The Guardian has previously revealed that Allwyn was borrowing millions from Kremlin-owned banks when it won the lottery contract in 2022. The Gambling Commission said at the time that it had carried out rigorous checks and was satisfied that Allwyn was not financed by a sanctioned entity. Allwyn said it had informed the regulator and unwound the loan as soon as the UK imposed sanctions on the banks.
Earlier this year, Desmond rejected a settlement offer from the commission, understood to have been worth about £10m. He has said he incurred £17.5m of costs relating to his failed bid for the lottery licence.
The case is scheduled to continue at the high court on Monday.
