International Game Technology (IGT) was a sub-contractor to Camelot, which was unsuccessful in its bid to win the licence to continue to operate the National Lottery. Camelot had originally brought proceedings to challenge the award of the licence by the Gambling Commission to the successful bidder, Allwyn Entertainment (Allwyn).  IGT had brought its own claim which was combined with Camelot's claim into one set of proceedings. However, Camelot's claim fell away when Allwyn purchased Camelot, leaving IGT as the remaining claimant in the proceedings against the Commission.  

In a judgment dated 28 July 2023, Lord Justice Coulson dismissed IGT's claim, finding that IGT did not have proper standing to bring the claim as a subcontractor, because IGT did not meet the definition of "economic operator" under the procurement regulations.

Consequently, in a decision published on Friday 8 September 2023, Lord Justice Coulson decided that IGT must pay the Commission's costs of the proceedings and determined that IGT should pay £2.1m on account, pending a full assessment of the Commission's costs, which are said to be £4.16m. 

IGT argued that Camelot had taken the lead role in the proceedings until the Camelot claim fell away, and so IGT should not be responsible for a significant proportion of the costs. However, Lord Justice Coulson reiterated that the amount to be paid on account should "be an estimate of the likely level of recovery, subject to an appropriate margin to allow for error in the estimation".

On the facts of this case, the Judge found that IGT would be required to pay significantly more than the £1m proposed by IGT's counsel, including that it was "inevitable" that IGT would have to pay at least 50% of the common costs that related to costs incurred by the Commission in dealing with Camelot and IGT prior to Camelot dropping out of the claim.

Often the successful bidder who has been awarded the contract that is being challenged wants to get involved in resisting the challenges against the authority. Those winning bidders who become involved are not automatically entitled to recover their legal costs.

Lord Justice Coulson agreed with and adopted the summary of the law on this issue set out by Mr Justice Fraser in the case of Bechtel v HS2[1]. That decision made clear that, when making a bidder an interested party for the purposes of the proceedings, the court will make a specific order stating the extent to which that interested party is entitled to participate. Without such an order, it seems unlikely that a winning bidder will be able to recover their costs from an unsuccessful challenger.  Even with an order, the interested party will need to be careful to limit its involvement to that which is permitted and to ensure that it does not duplicate the costs of the defendant authority. 

In the HS2 case, the interested party was able to recover only a very small proportion of its costs.  However, in this case Lord Justice Coulson referred to the various previous orders and judgments of O'Farrell J, which had made clear the extent of Allwyn's involvement in the proceedings. In particular, Allwyn had:

• properly been made an interested party;
• its own interests to protect and separate points to make;
• been expected to play, and did play, a full part in the proceedings.

Further, and importantly, Allwyn had not duplicated the submissions and points made by the Commission, but had confined itself to making its own separate points.  The Judge therefore concluded IGT must pay Allwyn's costs.

Procurement challenges can represent high stakes for all involved.  The risks for potential claimants can be significant, as they have potential additional costs risks to the interested party, as well as the defendant authority.

Interested parties can help defendant authorities in defending cases and potentially recover at least some of their costs. However, any interested party will need to engage and obtain formal recognition as an interested party by way of a Court order as early as possible and then be careful to restrict their participation in the claim, to maximise the potential recovery of their costs (and minimise the risk of any adverse costs order, if the challenging bidder is successful).

[1] [2021] EWHC 640 (TCC) at paragraph 25