Memorandum submitted by the Horserace
Betting Levy Board (HBLB)
1. The Culture, Media and Sport Committee
("the Committee") has invited written submissions from
interested parties in respect of its inquiry into certain aspects
of on-course horserace betting. The Horserace Betting Levy Board
("the Levy Board") wishes to take up this invitation
in respect of the Committee's Question (2) ie "what indications
on security of tenure, if any, were given to those buying positions
on bookmakers' lists in recent years?"
2. The Betting, Gaming and Lotteries Act
1963 (as amended) ("the 1963 Act") provides that the
Levy Board should comprise three independent members appointed
by the Government, three appointed on behalf of racing and two
on behalf of bookmakers and the Tote. This submission is made
on behalf of the independent members who do not consider it appropriate
to comment on Question 1 and Question 3 which are matters for
the parties directly concerned.
EXECUTIVE SUMMARY
3. The Levy Board did not consider that
bookmakers had security of tenure in respect of pitches and is
not aware that any indication was given to purchasers of pitch
positions that they may have had security of tenure. Having said
that, the Levy Board can see how some purchasers in 1998 and in
the years immediately thereafter might have thought that since
the administrative arrangements were underpinned by the 1963 Act,
and in circumstances where there were no proposals to repeal that
legislation, that in effect bookmakers who had purchased pitches
would retain the right to trade from those pitches subject only
to the pitches being transferred on the basis of the National
Pitch Rules ("NPRs"). However, once proposals were put
forward to repeal the 1963 Act, anyone who might previously have
held this view should have been aware of the risk that any successor
legislation might preclude the continuation of the NPRs at least
in their current form. The Levy Board is not aware that any racecourse
or bookmaker raised with the Levy Board the implications (if any)
of the repeal of the 1963 Act in respect of security of tenure
before 14 March 2007 (see paragraph 29 below).
4. The possibility of changes to the Bookmakers'
Lists ("the Lists") is made possible by the repeal of
the 1963 Act and it is within the power of either the Secretary
of State to grant security of tenure, if he wishes to do so, for
example by way of further mandatory conditions on track premises
licence holders or the Racecourse Association ("RCA")
or individual racecourses can do so voluntarily.
THE LEVY
BOARD'S
STATUTORY FUNCTIONS
5. The Levy Board is a corporate body, set
up pursuant to the provisions of the 1963 Act. Section 24(1) of
the 1963 Act requires the Levy Board to assess and collect mandatory
contributions from bookmakers and the Horserace Totalisator Board,
and to apply them for purposes conducive to any one or more of:
(a) the improvement of breeds of horses;
(b) the advancement or encouragement of veterinary
science or veterinary education; and;
(c) the improvement of horse racing.
6. Pursuant to Section 13(1) of the 1963
Act, the Levy Board issued certificates of approval to each of
the 59 horse racecourses in Great Britain. These certificates
could be the subject of such conditions as the Levy Board might
impose. Section 13(2) provided that as a condition of the grant
of a certificate of approval the racecourse should provide a place
where bookmakers may carry on their business and the charge to
a bookmaker for admission should not exceed five times the amount
of the highest charge to members of the public for admission to
the relevant enclosure (the "five times" rule).
7. By reason of section 1(5) of the 1963
Act, bookmaking was prohibited on a horse racecourse unless it
was an "approved" racecourse or a holder of a track
betting licence. Section 55(1) defined an "approved horse
racecourse" to mean any ground in respect of which there
was for the time being in force a certificate of approval.
8. Sections 13 and 1(5) of the 1963 Act
have now been repealed by the Gambling Act 2005 ("the 2005
Act") with effect from 1 September 2007. Thus the Levy Board
no longer has the statutory function of issuing certificates of
approval and the "five times" rule has been abolished
in respect of new betting areas after this date. The consequence
of removing the function of issuing certificates of approval is
that the Levy Board no longer has any functions in respect of
the administration of betting on racecourses, including bookmakers'
pitches.
ADMINISTRATION OF
ON-COURSE
BOOKMAKING: 1997-2001
9. The Levy Board's involvement in the administration
of on-course bookmaking began in October 1997 when negotiations
broke down between the National Association of Bookmakers ("NAB")
and the RCA, in respect of the long-standing agreement between
the two parties under which on-course betting rings had been administered
("the Fergusson Agreement"). The RCA gave notice that
the Fergusson Agreement would be terminated with effect from 8
October 1998 and, to avoid a lacuna in the administration of betting
on racecourses throughout the country, the Levy Board decided
to intervene.
10. In the autumn of 1997, the Levy Board
instigated a review of matters concerning betting on those racecourses
having a certificate of approval from the Levy Board and then
on 22 October 1997 appointed a sub-committee comprising the three
independent government-appointed members of the Levy Board to
review the conditions for the administration of racecourse betting
areas (all three have since retired from the Levy Board). The
sub-committee submitted its recommendations to the Levy Board,
which were considered and accepted as amended by the Levy Board
on 24 March 1998.
11. These recommendations set out a methodology
for the transfer of pick positions between bookmakers. It was
made clear to all parties in the sub-committee's report dated
March 1998 (copy extract attached at annexe 1) that no proprietary
rights arose from the pick positions.[18]
All that could be transferred was a bookmakers' seniority position
ie his position in order of seniority between other bookmakers.
Previously, there had been a "dead man's shoes" procedure
to entering betting rings, which only permitted the transfer of
a bookmaker's seniority position by way of succession by a registered
successor ie the son, daughter or wife of a pitch holder.[19]
It was recommended that it should be possible for others to purchase
pitches.
12. Therefore, the sub-committee recommended
that it should be possible to transfer pick positions by way of
(1) public auction (2) retirement and (3) will. The RCA had itself
considered the selling of pitches to bookmakers, the adoption
of a turnover basis for the fees, and the creation of new pitches
in members enclosures. However, the sub-committee were advised
that an attempt by a racecourse to sell pitches to bookmakers
could be considered to be a charge for admission to the betting
ring and therefore in contravention of Section 13(2) of the 1963
Act.[20]
Consequently, the racecourses were unable to bring into effect
these new procedures.
13. The sub-committee also recommended that
a new administrative body, the National Joint Pitch Council ("the
NJPC"), should be established from 8 October 1998 to promulgate
and enforce conditions for the administration of all areas of
the betting ring and issue new National Pitch Rules ("NPRs")
approved by the Levy Board as a condition of the certificate of
approval. The NJPC board comprised representatives from the NAB,
the Rails Bookmakers' Association ("RBA"), the RCA and
the Levy Board.
14. Compliance with the NPRs was a condition
on a certificate of approval for a racecourse. The NPRs governed
the conduct and administration of betting rings on racecourses.
The draft NPRs were finalised on 22 July 1998, to take effect
from 8 October 1998.
15. The NPRs also set out the basis upon
which new Bookmakers' Lists would be created by the NJPC. These
Lists, which ranked bookmakers in order of their seniority, represented
the basis upon which bookmakers attending each racecourse meeting
would be allowed to pick the position in the betting ring (the
pitch) on which they wished to stand. The concept of creating
new Bookmakers' Lists of seniority order as a basis for picking
positions in the ring each day was created to ensure that no bookmaker
could claim security of tenure over a particular pitch position
on a racecourse.
16. During the summer of 1998, the NAB sought
judicial review of the Levy Board's decision to accept the sub-committee's
recommendations for a change in administration.[21]
The NAB's application was rejected and the judge confirmed that
in the circumstances the Levy Board could attach conditions by
means of the certificates of approval.
17. Following the rejection of the NAB's
judicial challenge, the Levy Board revoked all of its certificates
of approval in respect of the 59 racecourses in Great Britain
and issued each of them with a new certificate of approval. Each
of these new certificates were subject to conditions which included
a provision that the racecourse betting areas should be administered
by the NJPC in accordance with the NPRs as approved by the Levy
Board.
18. One of the key aims of the 1998 arrangements
was to modernise the pitch transfer system by way of opening up
the procedure for transferring bookmakers' seniority positions
rather than providing bookmakers with security of tenure in relation
to list positions. One particular point which reinforces this
view is that if, for any reason, a racecourse did not have a certificate
of approval, for example, because the racecourse stopped trading,
the NPRs would not apply and the bookmakers would have no right
to trade from that racecourse.
19. Having said that, we note that as the
Bookmakers' Lists have been in place for several decades and it
was not envisaged in 1998 either that the Levy Board's role would
be abolished or that the concept of certificates of approval would
be revoked, some people might have taken the view that, unless
he decided to transfer a list position or a racecourse ceased
to trade, a bookmaker's list position was effectively permanent.
20. No-one could have envisaged in the years
to 2001 the wide-ranging changes that have been implemented in
respect of gambling legislation and the present outcome, which
is that the Levy Board no longer has the power to issue certificates
of approval and hence administer betting on racecourses.
21. Between 1998 and 2001, the issues facing
the Levy Board in respect of bookmakers' arrangements included
an amalgamation of seniority positions, issues relating to personal
seniority and disputes between the boards and rails bookmakers.
Nothing however was raised in respect of security of tenure issues.
REFORM OF
GAMBLING LEGISLATION:
2001-FEBRUARY 2007
22. In July 2001, the Government published
the Gambling Review Report which heralded a change in the betting
environment and a more liberalised approach. The DCMS then published
its consultation paper, A Safe Bet For Success in March 2002
("the 2002 consultation paper"), followed by policy
position papers published during 2003, which set out the Government's
proposals for the reform and regulation of the gambling industry.
23. The 2002 consultation paper indicated
that the "five times" rule might be revoked but made
no reference to issues relating to security of tenure.[22]
It is unclear at what stage it became apparent to the bookmakers
that their picks might be in jeopardy and there is no reference
to this issue in the consultation documents or policy papers.
24. Rodney Brack, the then Chief Executive
of the Levy Board wrote to DCMS on 29 October 2004 to clarify
the legal background in respect of bookmakers' pitches (copy attached
at annexe 2). In his letter he explained:
"The concept of creating new Bookmakers'
Lists of seniority order, as a basis for picking positions in
the ring each day, was created, following legal advice, to ensure
that no bookmaker could claim security of tenure over a particular
pitch on a racecourse. The Racecourse Association was insistent
upon this.
It is our view, therefore, that bookmakers have
no security of tenure over anything. All they have is their seniority
positions on the various Bookmakers' Lists as a basis for choosing
their daily standing positions while the current certificates
of approval remain in place. As and when the [Levy] Board's certificates
of approval are revoked, the related conditions, incorporating
the National Pitch Rules, will cease to exist and will, no doubt,
be replaced on the following day by new arrangements to be determined
by the Gambling Commission."[23]
25. Mr Brack's letter also noted that bookmakers
should have been aware that the purchase and sale of seniority
positions were subject to the limitations of the NPRs, which could
be revoked by the Levy Board. He added that, in respect of the
repeal of the "five times" rule, it had been agreed
that the Gambling Bill should provide that the five times entry
fee limitation should remain in place for a further five years
in respect of existing betting areas.
26. In February 2005, the NJPC inserted
a warning clause at Clause 18 of the conditions of sale of bookmakers'
list positions. Clause 18 advised bookmakers to make themselves
aware of the full implications of the 2005 Act when buying or
selling any list positions. The Levy Board understands from the
NJPC that this amendment was primarily intended to warn bookmakers
of the uncertainty at the time concerning the "five times"
rule and the possibility of betting in new areas, with the potential
knock-on effect on the value of bookmakers' investments in List
positions. We believe that it also a reflected the lack of certainty
as to how the 2005 Act might affect either the NJPC or bookmakers.
27. On the records now available to the
Levy Board, it appears to us that security of tenure was not raised
with the Levy Board by the bookmakers, racecourses or NJPC during
the period 2001-February 2007 and the Levy Board did not discuss
this issue during that period.
IMPLEMENTATION OF
LEGISLATIVE CHANGES:
FEBRUARY 2007
28. The Government issued the Gambling Act
2005 (Mandatory and Default Conditions) (England and Wales) Regulations
("the 2007 Regulations") in February 2007.[24]
The 2007 Regulations set out mandatory conditions attaching to
track premises licences, including horserace courses, setting
out the transitional arrangements in respect of the "five
times" rule until 31 August 2012. The 2007 Regulations make
no provision for transitional arrangements in respect of bookmakers'
list positions.
29. The RCA came to its decision that Lists
would not be valid beyond 31 August 2012 after having considered
the implications of the 2007 Regulations. The RCA issued a letter
to interested parties on 14 March 2007, which stated that it had
decided not to recognise Bookmakers Lists or transfers of List
Positions as between bookmakers beyond 31 August 2012.
30. The RCA's decision was based on changes
brought about by the 2005 Act which as noted above repeals the
1963 Act and terminates the current method of administration of
on-course bookmakers and the "five times" rule in respect
of new betting areas. The RCA's position is that from 1 September
2012, racecourses will enter into commercial arrangements with
bookmakers in relation to existing betting areas. As such, security
of tenure will continue for a further five years until 1 September
2012, but this is at the discretion of the RCA.
POSITION SINCE
THE RCA'S
ANNOUNCEMENT
31. The Levy Board first became aware that
the RCA intended not to recognise the Lists by way of the RCA's
letter dated 14 March 2007 referred to above. The NJPC immediately
sought clarification from the RCA and, once received, promptly
suspended List position sales and withdrew the "List positions
for sale" section from its website. Once the RCA views were
in the public domain, the NJPC resumed List position sales, with
the provision that the auction manager should ensure that both
vendor and purchaser were aware of the RCA's position and the
possible implications for Lists going forwards. The Levy Board
is unclear at what stage the bookmakers became aware specifically
that the Lists were in jeopardy.
32. If the Government had intended to change
the Lists by way of the 2005 Act, DCMS would have consulted the
Levy Board, the NJPC and other interested parties about this but
it did not do so and thus clearly did not have this intention.
The Bookmakers' Lists have been in place for several decades and
the current Lists are based on lists dating back to 1946. Neither
the 2005 Act nor the 2007 Regulations abolish the Lists themselves,
which could therefore be preserved, either through a replacement
legislative framework or if the RCA were content to voluntarily
carry on with the Lists.
33. Finally, we note that the transitional
arrangements in respect of the "five times" rule should
be considered separately from changes to the Lists. The "five
times" rule relates to the bookmaker's admission fee whereas
the List position provides the opportunity to trade. It would
be possible for commercial arrangements in respect of the admission
fee and the continuation of Bookmakers' Lists to operate in tandem.
October 2007
18 See paragraph 5.2 of the sub-committee's report
on the administration of horserace betting rings dated 24 March
1998. Back
19
See paragraph 5.1 of the sub-committee's report. Back
20
See paragraph 5.2 of the sub-committee's report. Back
21
R v Horserace Betting Levy Board ex parte National Association
of Bookmakers Limited (CO/2310/1998). Back
22
See paragraph 4.37 of the 2002 consultation paper. Back
23
See pages 1 and 2 of the letter from the Levy Board to DCMS dated
29 October 2004. Back
24
SI 2007/1409. Back
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