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  3. Fourth National Lottery Licence: Regulatory Handbook

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Fourth National Lottery Licence: Regulatory Handbook

The Commission’s regulatory handbook sets out our regulatory approach to the National Lottery.

Published
1 February 2024

Last updated
1 February 2024 - Changes

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  1. Contents
  2. Volume two: Monitoring Performance Framework
  3. 17. Condition 27: Exit

17. Condition 27: Exit

17.1 This section provides guidance in relation to Condition 27, which includes requirements for the Licensee to prepare and maintain an Exit Plan and enter into an Exit Cooperation Agreement, supporting the overriding duty set out in Conditions 27.1 to 27.5. These aspects are the focus of this section, which provides further guidance on our expectation of the:

  • Exit Cooperation Agreement
  • Exit Plan.

Exit Cooperation Agreement

17.2 The purpose of the Exit Cooperation Agreement is to ensure the continuity and orderly handover of the National Lottery, including the provision of supplies and services, the operation of any transferring assets, and the orderly management and discharge of obligations and disputes connected with the operation of the National Lottery. It will ensure that the National Lottery can continue with minimum disruption and inconvenience to the public when transitioning from one Licence period to the next and that the Licensee cooperates with us, our representatives, the Next Licensee and any third parties in connection with the transfer of the National Lottery operation.

17.3 As part of the Next Competition, the Exit Cooperation Agreement will be entered into between ourselves, the Licensee and the successful applicant for the Fifth Licence. The Fourth Licence does not specify the form or content of the Exit Cooperation Agreement, but we expect to develop it using the Third to Fourth Licence Cooperation Agreement as a reference point, including any lessons learned from the handover of the National Lottery operation to the Licensee at the start of the Fourth Licence, and where relevant, incorporating the wider obligations and requirements set out in the Fourth Licence.

17.4 We will draft the Exit Cooperation Agreement. Its development will take place before the start of the Next Competition in consultation with the Licensee, with the expectation that the first draft will be shared during the early phase of the Next Competition. The Exit Cooperation Agreement will come into effect from the start of the transition (following the announcement of the award of the Fifth Licence to the successful applicant and prior to the start of the Fifth Licence), and will define each party’s commitment to cooperation and support throughout the transition period, as well as describing the mechanics for cooperation, to ensure a seamless and smooth transfer to the Fifth Licence.

17.5 In line with Condition 27.25 we expect that the arrangements specified in the Exit Cooperation Agreement will include:

-transition management arrangements, including to ensure alignment of the Outgoing Licensee Exit Plan with the Incoming Licensee Transition Plan to ensure the smooth implementation of the elements of those plans requiring cooperation. This alignment will include the governance and reporting arrangements in place to support delivery of the plans and alignment of transition timelines

  • arrangements for the orderly transfer of selected items to the Next Licensee including any assets, asset inventories, subcontracts, operations, support and services the Next Licensee may require to be transferred. It will also include the arrangements for undertaking an asset survey to determine whether assets have been maintained in accordance with Condition 17 or whether rectification or maintenance is required, and provisions for removing and disposing of any unwanted assets

  • arrangements to address any Continuing Obligations18 and On-going Disputes. For On-going Disputes this will include ensuring the provision of information, access to personnel, reasonable assistance and the provision of an indemnity (see Condition 27.13) associated with the handling of such disputes

  • arrangements to ensure the Licensee will, where appropriate, identify, scope and provide support (including documentation, training and knowledge transfer) and services for the transfer of the National Lottery operation to the Next Licensee, having due regard to the successful applicant’s Transition Plan to be implemented by the commencement of the Fifth Licence

  • financial arrangements between the Licensee and the Next Licensee including financial settlement and reconciliation, the transfer of funds from and to Trusts which exist for the protection of Participant funds, and the apportionment of revenue, costs and liabilities

  • arrangements relating to the conduct and behaviours expected from all parties during the transition period to ensure an effective transfer is achieved

  • provisions for issue management, setting out remedies and consequences if there is evidence of frustration, dispute or non-compliance with the Agreement or which materially harms or delays the Next Licensee’s ability to deliver and implement its Transition Plan.

Exit Plan

17.6 Condition 27.29 sets out the requirement for the Licensee to maintain an Exit Plan at all times during the Fourth Licence Term, consistent with the delivery of the overriding duty set out in Condition 27.1. The Exit Plan must cover the following Exit scenarios: (1) the expiry of the Fourth Licence; and (2) the revocation of the Fourth Licence.

17.7 Consistent with Condition 27.31, we expect that a Senior Executive or Lottery Supervisor is assigned as an Exit Manager, and has responsibility for maintaining and continuously improving the Exit Plan throughout the Term of the Fourth Licence and for three months after the Expiry Date.

17.8 In accordance with Condition 27.29, in terms of the sequencing of Exit Plan development over the Fourth Licence Term, we expect that:

  • the Exit Plan at the start of the Fourth Licence Term will be the Plan submitted as part of the Fourth National Lottery Licence Competition
  • consistent with Condition 27.31(a), this should be updated and resubmitted to us within six months of the Start Date of the Fourth Licence (or if later, resubmitted promptly following confirmation of Fully Implemented Commencement), to take account of lessons learned during transition
  • thereafter, we expect the Licensee to update the Exit Plan as relevant on an annual basis to capture changing market and operational conditions. The latest version is to be provided to us at least annually, consistent with Table 35 of Assurance and Regulatory Reporting Requirements (volume three)
  • in Licence Year 5, a full review of the Exit Plan will be undertaken (in support of the Next Competition programme)
  • after the award of the Fifth Licence, within a timeframe to be specified by us, the Exit Plan should be updated considering the successful applicant’s approach and plan to transition into the Fifth Licence. This should include alignment with the Exit Cooperation Agreement and the Next Licensee’s transition plan as and when required.

17.9 In terms of content, we expect the Exit Plan to:

  • have version control, with material changes identified and a clear audit trial of revisions and their rationale
  • include change control mechanisms to capture any significant or material change that affects the delivery of the National Lottery operation. This could include, but is not limited to, changes related to the Technology Operation, use of Lottery Subcontractors and corporate ownership/management
  • include details of the provision of Lottery Information, access to Licensee Assets and support and cooperation which may include, but not be limited to, training and know-how, instructional materials and the provision of licenses to enable the Next Licensee (or its contractors) to use such materials
  • describe the approach to Exit costs to ensure the approach is consistent with Condition 27.2. It should also describe the approach to apportionment of costs where these might apply
  • include complete and accurate records, and define the approach to maintaining records and registers which are required to inform and support the Next Competition and the transfer to the Next Licence, including, but not limited to:
    1. documentation held within the Lottery Records Database (Condition 23.6) relating to Lottery Assets, including complete records of retail estate assets such as terminals, asset condition, location, maintenance approach, ownership, control and/or possession and how they would pass to the Next Licensee if required
    2. documentation held within the Lottery Records Database (Condition 23.6) relating to Lottery Subcontracts, including complete and accurate information regarding the status of each contract, whether each contract includes all Required Standard Terms, the end dates and whether these are annual rolling contracts or renewable, and whether the contracts are capable of transferring/novating upon Exit if required
    3. the Lottery IP register (Condition 19.7), including details of the owners of IP and the transfer of any and all rights and ownerships.
  • describe the process for facilitating transfer or novation of Lottery Subcontracts, transfer of Licensee Assets, including Lottery Data, Lottery IP and the removal and disposal of unwanted assets from the National Lottery estate, ensuring risks are managed and assurance provided
  • set out end of life (EOL) or end of support (EOS) dates for Lottery Assets (such as IT infrastructure), with details of appropriate plans, measures or mitigations where the EOL or EOS date is approaching
  • set out the approach to end of Licence financial reconciliation and the process for transferring any Continuing Obligations to the Next Licensee.

17.10 In terms of the substance of our assessment of the Exit Plan and its compliance with the requirements of Condition 27, we expect that the relevant factors and considerations will include:

  • the appropriateness and adequacy of the Licensee’s risk management policies, processes and procedures in relation to Exit, and the effectiveness with which it has applied these
  • the accuracy of relevant records and registers kept in accordance with Conditions 23.4 to 23.7 and Condition 19.7, and the robustness of procedures to maintain and update these
  • the approach to ensuring mechanisms are in place to support a transfer of Licensee Assets (with a particular focus on those assets and/or contract transfers which are critical to the delivery and ongoing operation of the National Lottery), including ensuring the use of data and entitlement to transfer data, and removal and disposal of unwanted assets
  • the proposed support services available including access to relevant systems, training and know-how to be made available
  • the approach to ensuring that the running and operation of the National Lottery will be protected up to and including the end of the Term.

References

18For example, these might include outstanding prize claims or unclaimed prizes.

Previous section
16. Condition 18: Financial and Operational Resilience Next section
18. Condition 28: Outstanding Liability Fund
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