Exploring EU protections for whistleblowers

January 2020  |  FEATURE  |  FRAUD & CORRUPTION

Financier Worldwide Magazine

January 2020 Issue

Whistleblower protection in the European Union (EU) is fragmented across Member States. At present, only 10 EU countries have a comprehensive law protecting whistleblowers and at EU level, such legislation exists in only a limited number of sectors, primarily financial services.

However, given the increased prominence of and protections for whistleblowers in other jurisdictions, and the publicity created by a number of high-profile cases, EU-wide whistleblower protections are finally becoming a reality. “The EU has recognised that whistleblowing can be a vital tool to tackle a wide range of behaviours,” says Natalie Sherborn, a partner at Pinsent Masons LLP.

Two additional factors have played an essential role: protection of the public interest and protection of the individual whistleblower. “Violations of EU law may lead to considerable financial losses not only for the Member States, but also for companies, because fair competition in the common market is then distorted,” says Dr Eike Bicker, a partner at Gleiss Lutz. “Improved detection mechanisms, of which whistleblowing has proven to be a very effective one, improve the chances of uncovering corporate misconduct. Furthermore, freedom of expression and freedom of press are considered to be under threat without EU-wide regulations.”

“Whistleblowers should not be punished for doing the right thing,” said Věra Jourová, European Commissioner for Justice, Consumers and Gender Equality, in a speech following adoption of the directive on whistleblower protection at the Justice and Home Affairs Council in Luxembourg by the European Council of Ministers. “Our new, EU-wide rules will make sure they can report in a safe way on breaches of EU law in many areas. Whistleblowers can be crucial sources for investigative journalists. Therefore, protecting them also promotes media freedom. I urge Member States to implement the new rules without delay,” she added.

The Directive, which was proposed in April 2018, aims to guarantee a high level of protection for whistleblowers who report breaches of EU law, by setting new, EU-wide standards. The Whistleblowing Directive ensures protection for whistleblowers reporting breaches of EU legislation in several fields. It explicitly prohibits reprisals and introduces safeguards to prevent those who make a report being suspended, demoted or intimidated or face other forms of retaliation. The Directive will soon be published in the official journal of the Council of the EU.

Beverley Oliver, head of sales at Safecall, points out that the EU Directive draws on existing legislation of EU Member States, borrowing elements from the English Public Interest Disclosure Act and French Sapin II whistleblowing regulations in the financial services industry. “As such, organisations can look to the financial services industry for best practice.”

Once approved by EU ministers, Member States will have two years to comply with the Directive which requires all organisations – both public and private – with 50 or more employees, or with an annual turnover or total assets of more than €10m, to set up internal processes for reporting and whistleblowing. “The EU Directive captures reporting on public procurement, consumer protection, health, anti-money laundering and corporate taxation, data protection, protection of the EU’s financial interests, food, product and nuclear safety and environmental protection, with the European Commission encouraging Member States to extend the rules to other areas,” says Ms Sherborn.

Impact of the Directive

The impact of the new Directive will depend primarily on two factors: perceived value and enforcement. “The perceived value of effective whistleblowing arrangements is increasing rapidly due to the increased frequency of high-profile white-collar crime and the impact on businesses,” says Ms Oliver. “Forward-thinking governments and businesses will adopt effective practices above and beyond this EU Directive in an effort to insulate organisations from the harmful impacts of malpractice. The introduction of ISO37002, due for publication in 2021, will be a welcome framework for best practice.”

Because in the EU external whistleblowers are only fully protected if they initially report internally, unless there is an emergency, companies will have a strong incentive to establish strong internal reporting channels and an efficient response team. “Only with such a robust whistleblowing and response system can companies avoid having whistleblowers report to the authorities or the public, which in turn would put the company in the crosshairs of criminal or other public investigations,” says Dr Bicker. “Consequently, the impact of the EU Directive is likely to be significant.”

UK uncertainty and the future

In the UK, there remains some uncertainty over the implementation of the Directive. Whistleblowers are granted protection by the UK Public Interest Disclosure Act 1998 (PIDA). Under the PIDA, employees are protected against detriment and from being dismissed because they have made a protected ‘qualifying disclosure’. It is unclear if the UK will decide to implement any of the Directive into national law once it leaves the EU. In any event, many of the principles contained within the new Directive are already incorporated within PIDA. The UK is recognised by the Commission as having one of the most advanced systems of whistleblowing protection in the EU, however whistleblowing advocates remain concerned about the prospect of the country failing to implement the legislation, which would risk UK whistleblowers being left behind with out-of-date legislation.

The introduction of the new Directive marks an important point in the EU’s struggle to protect whistleblowers. It is long overdue. Member States will have the opportunity to lead from the front in the fight against retaliation and recrimination.

© Financier Worldwide

BY

Richard Summerfield