A decision to award the contract to run the National Lottery was “unfairly favourable” to Czech bidder Allwyn, lawyers for former Daily Express owner Richard Desmond have claimed.
In the High Court on Wednesday, lawyers for the media mogul’s Northern & Shell alleged there were conflicts of interest during the bidding process to run the prize for the next decade and that the competition was “seriously flawed”.
The Gambling Commission, which awarded the 10-year licence to run the National Lottery to billionaire Karel Komarek’s Allwyn in 2022, denied the allegations at a hearing on Wednesday.
Lawyers for the regulator argued his bid failed because it was “fanciful”.
Allwyn took control of the National Lottery earlier this year with the prize draw expected to generate £100bn in ticket sales over a decade-long contract.
The competition donates billions of pounds for good causes, while ensuring long-term profits for the operator.
The Czech group, part of the conglomerate KKCG, fought off a bid from Mr Desmond’s The New Lottery Company, part of Northern & Shell, and incumbent operator Camelot two years ago.
However, the bidding process to secure the contract has been beset by litigation and dispute.
Camelot, which had run the National Lottery since 1994, took the Gambling Commission to court over the decision to hand the contract to Allwyn, but it later withdrew its claim and was later taken over by its Czech rival.
Mr Desmond’s companies are now suing the regulator over their rejection during the procurement process and are seeking tens of millions of pounds in damages.
Northern & Shell’s lawyers argued the Gambling Commission provided “inadequate” and “inconsistent” feedback on its initial proposals, causing its bid to fail.
In court filings, they claimed that officials offered “unfairly favourable treatment to Allwyn’s application”, ignoring alleged press leaks during the process.
They said the regulator’s handling had caused it to lose out on “one of the most significant and valuable UK public procurement opportunities in recent years”.
Michael Bowsher KC, acting for Northern & Shell, also told the court that the Gambling Commission’s adviser – the investment bank Rothschild – was conflicted as it had also worked for Allwyn.
“The conflict was clear,” he said.
Northern & Shell also claimed Allwyn was allowed to modify its operational plans for the National Lottery after winning the contract.
Allwyn has said the changes were caused by delays resulting from the legal claims brought against it and the regulator.
However, lawyers for the Gambling Commission claimed Mr Desmond’s bid to run the National Lottery performed “extremely badly” and was “fanciful”.
Sarah Hannaford KC, representing the regulator, argued Northern & Shell’s attempt failed on several “mandatory” tests and “scored much lower” than Allwyn’s competing bid during the procurement process.
“It didn’t fail by just a bit,” she said.
In a legal filing, the regulator said Allwyn scored 87.18pc in the process, while Northern & Shell’s effort failed to pass several mandatory checks and was scored 57.5pc.
Because Northern & Shell failed the “pass or fail” assessments, the regulator argued its claims should be dealt with at a short trial as the group “cannot show that it could have won or that it has lost a real (as opposed to a fanciful) chance of winning”.
She added Rothschild were “not the decision maker” in the bidding process, but provided some financial analysis for the regulator.
It is understood Rothschild conducted some work for Allwyn in 2019, before the Gambling Commission process began.
Allwyn is owned by Mr Komarek’s KKCG, a holding company that has been scrutinised by MPs for its links to Russian energy giant Gazprom.
Its business includes a Czech gas storage plant, which was a joint venture with the Russian business.
Last week, KKCG confirmed it had bought out Gazprom and the facility now had no Russian ownership.
“This has been achieved after passing through a number of necessary legal and regulatory processes,” the group said, adding it prevented the plant from “coming under Russian control”.
A Gambling Commission spokesman said: “We are confident that our proposals that are being brought before the court represent the most effective way to dispose of the litigation.”
Rothschild was contacted for comment. Allwyn declined to comment.
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