Fair game?

News of the National Lottery Commission's shock decision to exclude Camelot from further negotiations reached David Pannick QC of Blackstone Chambers when his mobile phone rang on a beach in Cannes on 23 August last year. The thrust of the argument that would dramatically overturn the commission's decision was formed there and then as Pannick spoke to Camelot's advisers at Baker & McKenzie. The case, he told them, would be about procedural unfairness.

So began another lap in the farcical race to run the UK's National Lottery for the next seven years. After months of delay, speed suddenly became critical.

The Baker & McKenzie team, made up of Tom Cassels and lead partner David Fraser, spent most of the next 48 hours with their client. In Pannick's absence, Christopher Carr QC of One Essex Court stepped in to help prepare. Blackstone Chambers junior Tom de la Mare was also closely involved.

Cassels says: “Camelot was out of the procedure and potentially out of business. We were concerned that at any moment the defects identified by the commission in the People's Lottery would be remedied. The commission made it clear that they wanted the People's Lottery to show that it had financial support to a greater extent than it had shown in the bid. It seemed to us quite possible that this would be something it could do quite quickly.

“Camelot received our advice and that of David Pannick very quickly after the decision [to exclude it] was made. They then spoke to the commission and asked for assurance that they would be let back into the process. When that assurance was not forthcoming, our instruction to challenge the decision was confirmed.”

It is now the stuff of City legend that Branson was within an hour of signing the necessary documents before Camelot managed to muscle its way back into contention through the High Court. The efforts of its legal team culminated in a momentous judgment handed down by Mr Justice Richards on 21 September, in which he chastised the commission for acting in a way that was “conspicuously unfair” and “an abuse of power”.

Fraser says: “That was what enabled Camelot to achieve the result that was needed. With that sort of judicial support, Camelot was able to press ahead with the confidence that it had been treated unfairly in the first round and to insist that it was treated fairly in the second round.”

Michael Smyth, the Clifford Chance litigation partner who advised GTech, Camelot's technical partner, says: “Every claimant in a commercial judicial review of this sort is advised that the odds are stacked against them, particularly so where the regulatory remit is as broad as it is in the case of the National Lottery Commission. The fact that the commission's decision should, against that background, have been overturned, shows how remarkable this litigation was.”

Judge Richards' dramatic conclusion was similarly reassuring to public law experts watching the fray from a safe distance.

“The commission's decision to negotiate exclusively with the People's Lottery for a month was bizarre and really rang warning bells. Procedural fairness is all about hearing both sides,” says Lovells litigation partner Jennifer McDermott. “Naturally, Camelot was incensed, and so was GTech, so the scene was set for a major judicial review battle.”

Almost as bizarre as the commission's decision was Branson's decision not to appear at the judicial review to bolster submissions made on behalf of the commission. Both GTech and the People's Lottery were served with the application, but only the former was represented in court. One public lawyer says: “I think it would have done Branson no harm to participate and it might have done him a lot of good. But I think he was enjoying being on the sidelines, letting Camelot and the commission fight it to the death. As it happened, Camelot and GTech got a free ride.” During the case, Camelot and GTech were able to show that the commission had written a letter in July which led them to believe that enough had been done to allay the commission's fears over GTech.

The same lawyer adds: “Branson has many court cases under his belt. It was therefore a remarkable call not to participate in the court proceedings.”

Herbert Smith public law and litigation partner Andrew Lidbetter agrees that, with hindsight, Branson's conspicuous absence from court is interesting. Perhaps the Branson camp saw the case as a matter strictly between the commission and Camelot and was confident that the former would win. Yet it is difficult to accept that the legal costs of a court appearance were seen as too great or as an unjustified expense. Harbottle & Lewis was unable to comment on its advice to the People's Lottery on this matter.

Further surprise was still to come after the judgment. In an unprecedented move, the commission jettisoned Treasury solicitors and held a beauty parade between private practice firms. It decided on Freshfields Bruckhaus Deringer for all its procedural advice to ensure the process would now be fair to both bidders (The Lawyer, 9 October 2000). Gordon Pollock QC, head of chambers at magic circle set Essex Court, would be called on if the need arose.

But the commission's reasoning does not sit easy with everyone. “One has to feel very sorry for the Government lawyers who have been made to walk the plank over this, not least when the difficult task they were facing was amply demonstrated when Freshfields, which replaced them, instructed Gordon Pollock QC,” says one expert. He adds: “Most of the people in the Treasury solicitor's department are second to none in terms of their administrative law expertise. The way they were scapegoated looks very regrettable.”

As The Lawyer goes to press, speculation continues as to whether or not the People's Lottery had grounds to judicially review the commission's December decision. When Branson announced on 10 January that he would not proceed with a judicial review to reopen the contest yet again, he said that his decision went against legal advice, suggesting that he had a strong case. But McDermott says: “The commission set out in its statement of reasons all the factors, which it took into account and weighed up. It would, therefore, probably be quite difficult to argue that it acted in granting the licence to Camelot in a manner in which no reasonable regulator could have acted. This is a high threshold to meet and why most judicial reviews fail rather than succeed on the Wednesbury unreasonableness test.” Indeed, Camelot's success in the September judicial review means that its case will be one that public lawyers quote from in the future. Lidbetter says: “The most important point is that this is a high-profile judicial review case, and the way things have ultimately turned out shows that the judicial review may have affected the outcome of who ultimately obtained the licence.”

He adds: “The degree of publicity the case received may encourage other companies aggrieved by the decisions of regulators to explore the possibility of judicial review. For understandable reasons, companies are quite often reluctant to challenge the decisions of regulators, particularly if they are regulators which the company will have ongoing dealings with.”

The nature of the judgment may also influence the way future cases are shaped. Lidbetter says: “From a practical perspective, the main point was the way in which the judge ruled upon the concept of unfairness amounting to the abuse of power when examining what had taken place and expressed himself as looking at the matter in the round.” The alternative, he says, would have been to refer to more specific alleged failings. “I think this will encourage applicants to look closely at the possibility of framing a case as one of unfairness amounting to abuse of power,” concludes Lidbetter. n