Procurement Update: The risks and benefits of Interested Party status

On 16 July 2025, the Technology and Construction Court handed down judgment on an interim ‘security for cost' application in the long-running procurement litigation between Northern & Shell (best known as the operators of the ‘Health Lottery’) and the Gambling Commission (the non-Departmental Public Body which licenses the National Lottery). 

The upside of a successful ‘Security for Cost’ application is clear from the name: the Court will order the other party to give some security (e.g. a company guarantee, payment into court, payment into escrow) as assurance it can meet the other parties’ costs in the event of a cost order against it. It is therefore a valuable source of protection (if ordered) against the risk that a Defendant will successfully defend a claim against it, but then be unable to recoup its litigation costs from a (now impecunious) Claimant. 

This judgment is a potentially useful reminder of two points, and breaks new ground on a third:

[1] ‘Security for Cost’ Applications can be a useful weapon even if unsuccessful: The application by the Defendant (Gambling Commission) failed because the judge was not satisfied that there was “sufficient reason to believe that the Claimants would be unable to pay the Defendant's costs if ordered to do so” (i.e. if the Claimant lost its procurement challenge). That is the essential threshold test.  Nevertheless, the application appears to have teased out assurances from the Claimants as to just how they would be about meeting those costs. The Claimants provided substantial evidence demonstrating their ability to marshal funds from within their wider corporate group to meet any adverse costs order. So the application has probably served a useful purpose for the Defendants. 

[2] An ‘Interested Party’ in procurement litigation is neither the Claimant nor the Defendant: The ‘Interested Party’ in this claim is – as has become common in procurement challenges – the winning bidder of the National Lottery procurement under challenge: Allwyn Entertainment.  The Technology and Construction Court Guide gives Interested Parties a clear role in procurement disputes. Sometimes, Interested Parties may take quite an active role (see for example their role in the 2019 Rail Franchising Litigation). Being an interested party brings with it some privileges which are not enjoyed by non-parties (greater insight into the litigation). However, it also has its limitations, which leads nicely to the third point (which is the novel one).

[3] An ‘Interested Party’ is not entitled to ‘Security for Costs’: The Court determined that it does not have ‘jurisdiction’ to make such an order. In other words, the Civil Procedure Rules do not actually give the Court the power; the Court simply can't order that the Claimant gives security in relation to the costs on an Interested Party (whereas it does have the power to grant such an order in favour of a defendant). We suspect that this will have limited impact in persuading would-be Interested Parties to now opt to be added as Defendants.  Nevertheless, it is not unknown for the winning bidder to seek to be added as a Defendant to a procurement challenge. This comes with the benefits, but also the detriments, of a fuller participating role in the litigation. 

Further information about the case 

This litigation arose from a procurement process conducted by the Gambling Commission for awarding the Fourth National Lottery Licence between 2019 and 2022. One of the Claimants (“New Lottery”) is a special purpose vehicle (SPV) created by the other Claimant, Northern & Shell PLC (more widely known as the entity responsible for the ‘Health Lottery’) for the sole purpose of bidding to win in the Fourth National Lottery. 

New Lottery were unsuccessful and subsequently filed two claims against the Commission. The first claim (the "Scoring Claim") alleges that, if had the evaluators had correctly scored the respective bids, then New Lottery (and not Allwyn) would have been the winning bidder. The second claim (the “Modification Claim”) challenges the legality of the modifications made to an Enabling Agreement and the Licence itself between the Commission and Allwyn. The New Lottery and Northern & Shell are seeking damages amounting to approximately £1.3 billion.

This most recent New Lottery judgment was primarily concerned with two issues, both arising from an application for security of costs by the defendant and the interested parties. The first, a novel point, was whether the court had the power to grant security for costs in favour of an interested party. The second issue was whether a parent company with limited assets (Northern & Shell), may rely upon evidence of its control over a wholly owned subsidiary with substantial assets (its Property holding company) to avoid an order for security for costs against it.

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This article was written by Lloyd Nail, with assistance from Jade Gillett. Our Dispute Resolution team is dedicated to achieving successful outcomes for our clients, focusing on resolving your disputes swiftly and effectively. We prioritise outcomes, not just the process, working alongside you to ensure the right solution is found, minimising the impact on your business whilst maximising success.  Lloyd and Jade are both part of our ‘Band 1’ Procurement Team recognised by clients for its ability “to deal at pace with complex issues in a creative, thoughtful, and practical way."