With revised gambling legislation and new casinos coming on stream – including manchester’s supercasino – Jon Robins talks to specialists about new opportunities and the value of niche practices




If as a gambling lawyer you are not phenomenally busy at the moment, then there is something wrong, says Julian Harris, partner at niche City gambling and leisure law firm Harris Hagan.



Earlier this month, the government sprung a surprise by choosing Manchester as the host of Britain’s first Las Vegas-style ‘super-casino’, beating off bookies’ favourites Blackpool and the Millennium Dome at Greenwich, and it also named the locations for a new generation of casinos under the new regulatory regime of the Gambling Act 2005.



This spirit of liberalisation means its game on for specialist gambling lawyers as operators pursue licence applications for new casinos (and resist competitors) under the old regime of the 1968 Gaming Act, as well as contemplate their futures and the possibility of a legal fight to level the playing field between them and the new casinos.



‘When the Gambling Act comes into force on 1 September, there will be only 17 new casino licences which can be granted,’ explains Mr Harris. This breaks down into eight ‘large’ casino licences (1,500 sq m, plus 150 machines with jackpots of up to £4,000) as well as a further eight ‘small’ casinos (750 sq m and up to 80 machines with £4,000 jackpots). Manchester won the right to play host to the 5,000 sq m super-casino with 1,250 slot machines with unlimited jackpots.



‘A lot of our time now is being spent by those applying for and objecting to each other’s clients’ applications for the 1968 Act casinos at the moment,’ reports Nick Nocton, a gaming and betting partner at central London firm Jeffrey Green Russell. The number of licence applications has rocketed to get in ahead of the new regime, which effectively freezes the number of new casinos for the next three years. According to the Gaming Board’s annual report, between April 2004 and March 2005, 29 casino applications were made in the UK. That figure more than doubled to 67 last year and, it has been reported, that between April and October 2006, 37 applications have been approved.



The government ‘drew up the drawbridge’ in April last year, comments Suzanne Davies, a gaming partner at boutique London firm Joelson Wilson & C0. She explains that the first step in acquiring a gaming licence for a casino operator under the 1968 legislation was to apply for a certificate of consent and from then the operator could apply for a gaming licence from magistrates. ‘When the government indicated that it was bringing up that drawbridge, so that effectively you couldn’t apply for any more certificates of consent, there was a flurry of activity from existing and new operators thinking that this was their only chance under the old regime to apply,’ she continues. The firm’s clients include the Rank Group, which includes Mecca Bingo and Grosvenor Casinos.



Mr Nocton describes that application process as ‘very evidence-intensive’, where operators have to demonstrate ‘unstimulated, unmet demand’. He says: ‘The old law is framed in such a way so that operators do not “stimulate” the demand for gambling. There are major barriers to entry set by the old legislation, namely this requirement to demonstrate that there is demand already in the marketplace, although licensing committees do retain a residual discretion. This means you need considerable market research evidence.’



Clearly, there is much at stake for applicants (as well as for objectors who will want their say) and as a consequence hearings typically last between five and seven days. ‘Licenses are very valuable and clients throw a lot of money at them, frankly,’ says one specialist lawyer. ‘A good part of that process is taken up with pulling together a legal team that knows what they’re doing, including lead counsel and sometimes even junior counsel.’ Ms Davies says: ‘In a busy year, we would have half a dozen new licences and opposed applications. At the moment we are working on about 30.’



Many of the major operators will be hoping for one or more of the 17 new licences. ‘It is the stated position of Stanley Casinos and Grosvenor Casinos that they will be interested in applying for all 17,’ says Mr Harris. His firm represents Gala Coral, Stanley Casinos, and Coral Racing, as well as Kerzner International. ‘The competition process is going to be fiercely competitive and for the next couple of years will keep a lot of lawyers very busy pulling together bids,’ he predicts. ‘It isn’t just licensing issues. If you’re talking about a bid for a regional casino licence, you need planning lawyers, corporate lawyers, property lawyers, as well as licensing specialists. You need just about every lawyer that you can imagine because the scale of the regional casino is simply vast and will, for example, involve hotels as well as other leisure facilities with the casino at its heart.’



Not surprisingly, the country’s 138 existing casinos are far from happy with the possibility of competitors setting up on their patch with the ability to offer greater numbers of slot machines with bigger jackpots. No sooner had the government made its announcement than the British Casino Association instructed City firm Herbert Smith about the possibility of a judicial review. The trade body pointed out that 11 of the new breed of casinos are to be in locations where existing members run gaming operations, and it complains that deregulation creates ‘a dichotomy’ between the two regimes.



‘It is like having a corner shop, and a supermarket setting up on its patch,’ said the association’s chairwoman, Penny Cobham, who described the proposals as ‘an extraordinary distortion of competition’. One lawyer comments: ‘I don’t think there is any doubt that there is a restraint of trade. The question is whether or not that is justifiable on social policy grounds.’



The Gambling Act also effectively legalises online gambling in the UK as of September, as well as requiring Internet-based companies based outside of Europe and Gibraltar to apply to the government if they want to advertise their products in the UK. However, lawyers are not putting any money on a flood of business as international operators take advantage of the Gambling Act provisions and set up shop here, despite the US’s ongoing crackdown. With online gaming outlawed in the US, there have been a series of arrests across the Atlantic involving executives from non-US online gaming companies.



Carl Rohsler is an intellectual property partner at national firm Hammonds who also specialises in online gambling. He says: ‘My first instruction ever for Internet gambling was by Caesars Palace back in 1995, who said: “Do you think it would be possible to bet over the Internet?” I should’ve framed it.’



Mr Rohsler is alarmed that ‘senior directors of properly regulated companies are being arrested and extradited in relation to laws which are by no means certain and, by no means, obviously applicable to them’. He continues: ‘Some people are even saying banks and legal advisers who act for these people are in some way assisting the commission of a federal offence in the US.’



Blocking an entire industry from operating is ‘protectionism of the worst sort’, he adds. He also believes that few operators are likely to be drawn to the newly-liberalised UK. ‘The tax regime in Alderney and Gibraltar is significantly more competitive than it ever would be here,’ Mr Rohsler reckons.



‘I wouldn’t have thought international operators would set up in the UK,’ agrees Hilary Stewart-Jones, the partner who heads the gambling practice at City firm Berwin Leighton Paisner. ‘The tax rates are probably going to be too punitive for that. However, there might be a certain value and kudos in getting a licence in the UK.’ Ms Stewart-Jones specialises in advising online gambling clients and in the last three years has worked on floats of companies including CryptoLogic, NETeller, and 888.com.



The new regulatory regime means that the practice of gambling law has become yet more specialised. Ms Stewart-Jones, a former head legal director at Ladbrokes, says the practice used to be regarded as ‘low-rent stuff’. She says: ‘The breadth of practice has expanded hugely. It’s not enough to know your way around the odd magistrates application now. It’s a much broader area, particularly now we have the new Act to contend with.’



One of the features of gaming law practice is that much of the expert advice is contained within niche practices as distinct from the larger commercial firms. ‘We often assist the big City firms with gaming aspects [of a deal] where we aren’t instructed as primary lawyers,’ comments Joelson Wilson’s Suzanne Davies. ‘We tend to be instructed by the likes of Herbert Smith and Linklaters, who farm out the gambling or gaming aspects of the transactions to specialists.’



The natural approach of lawyers is to be cautious and ‘to step into this area of the law makes them nervous’, reckons Julian Harris. ‘One of the great advantages of a firm like ours is we’re so specialised other firms can instruct us without any threat that we’re going to take business away.’



Mr Harris adds that it helps that he and co-partner John Hagan understand the gambling world and its culture. He admits that he likes the odd flutter – but never too much. He says: ‘I have seen it from the industry perspective. I know I’m going to lose.’



Jon Robins is a freelance journalist