Commercial And Dispute Resolution: Is It Time To Roll The Credits?

Carl Rohsler, head of the gambling team at Hammonds discusses an important feature of the new UK law which does not seem to have received much attention - the ability to enforce contracts for gambling and for money lent on gambling contracts.

Some parts of the Gambling Act 2005 (the Act) have provoked significant debate: on-line gaming, the issue of super-casinos, gaming machines and TV advertising to name but a few. However, other changes brought in by the legislation have not created much of a stir. One area which seems to have been largely overlooked is s.335 of the Act which provides that "the fact that a contract relates to gambling shall not affect its enforcement". Thus, the simplest of sentences, wipes out over 200 years of precedent which has formed the common practice not only in the UK but also in most common law jurisdictions around the world1, that gambling contracts are debts of honour only.

Changes From September

It might be asked - why is the change important at all? - after all, the industry has coped for many decades without being able to enforce gambling debts. The significance comes not from the fact that the gambling contract itself will become enforceable (after all, the house can still protect itself by demanding the stake up front), but that contracts to lend money to those who gamble will also be enforceable. This brings forward the prospect of banks and other financial institutions offering loans or credit for gamblers, and being able to take to their credit committees for the first time a realistic risk assessment of the debts incurred. An alternative would be an insurance market in gambling risk.

Will There Be Any Customer Demand?

Those outside the industry are prone to raise at least an eyebrow at the thought of the provision of credit for gambling, given the potential for a consumer to get "out of his depth". In reality, however, no financial provider will be keen to advance monies to those from whom it is unlikely ever to recover. Instead, lending institutions may have their sights set on more lucrative propositions, to be found where the punter has an interest in gambling with third-party funds, but is likely to have means for repayment.

Cultural considerations are likely to be a significant factor in the take-up of credit for gambling. For example, in the Far East there is something of a stigma attached to gambling with one's own money. The provision of credit to this type of player might well create a...