A little over a year ago, the EU adopted the Directive on the protection of persons who report breaches of Union law, a first-of-its-kind EU law meant to provide legal protection for whistleblowers. EU Member States have one year left to transpose the EU Directive into national law. However, in the year since the adoption of this landmark bill, none have done so, probably due to certain complex issues around the EU Directive.
In November 2014, the International Consortium of Investigative Journalists (ICIJ) published thousands of documents leaked by Antoine Deltour and Raphael Halet, former employees of the accounting giant PwC, leading to what has since come to be known as the Luxleaks scandal. With the help of Edouard Perrin, a French journalist, the ICIJ made public the tax rulings (agreements on taxation) between Luxembourg and major corporations like Ikea, Fiat, and Pepsi, demonstrating the country’s obscure tax practices and causing a furor.
Deltour, Halet, and Perrin were charged with several accusations such as breach of secrecy and theft. Perrin was acquitted by the Luxembourg Tribunal (lower court) as a journalist, but the two whistleblowers were prosecuted. The Luxembourg Court of Appeal acquitted Deltour of most charges but convicted him of theft and convicted Halet of all charges. At the time, Luxembourg did not have a national law protecting whistleblowers, so its Court of Appeal referred to the case law of the European Court of Human Rights. The Luxembourg Cassation Court—the Highest Court in civil and criminal matters—decided to acquit Deltour of theft, while Halet’s charges were confirmed and he was convicted.
Scandals such as LuxLeaks highlight the fact that European whistleblowers are often not protected under national laws.
The European Parliament had long invited the European Commission to propose legislation to protect whistleblowers, but these demands were not answered adequately. Following this period of scandals and subsequent pressure from the European Parliament in the form of resolutions (several of which were adopted from 2011 to 2017), the EU decided to intervene and step in order to bring coherence. Within the span of two years, the Directive was negotiated and voted on. This is a remarkable achievement, given that sometimes the EU legislative process may take many years. Despite the sensitivity of whistleblowing, EU Member States had found agreement on certain provisions, which ultimately formed the Directive.
In October 2019, the EU adopted the Directive on the protection of persons who report on breaches of Union law, which went into effect on December 16, 2019. EU Member States were given two years (ending in December 2021) to transpose the Directive into national law. Under EU law, a Directive provides minimum standards, and each Member State should adopt a national law by respecting the Directive’s provisions and its national legal system. This process is called transposition.
The one-year anniversary of the Directive’s adoption came and went two months ago, yet so far no EU Member State has transposed it. 19 out of the EU’s 27 Member States currently have draft legislations in progress and there are 8 EU Member States that have not even started to draft a law. It would be interesting to see in which way the EU Member States will transpose the Directive into national law, given that the Directive faces challenges from EU national legislators on several fronts.
For instance, the Directive has a limited material scope, covering certain sectors such as transport and product safety and leaving out certain sectors such as national security. This means that protecting whistleblowers may necessitate the passing of two national laws, one transposing the Directive and the sectors it covers, and one related to the other sectors which are outside the Directive. While the European Commission encourages EU Member States to adopt one law, EU Member States are free to decide to not follow this guidance. This dichotomy is a major challenge for national legislators.
In Europe, as the European Commission had noted in its 2018 Impact Assessment, whistleblowers are regarded as an enforcement tool. There are specific areas of EU interest, such as the financial markets, where certain EU rules have not been enforced, potentially leading to serious harm to the public interest. Whistleblowers are in a privileged position to report these breaches due to their closeness to significant information on potential wrongdoings. To enhance enforcement, the EU adopted the Directive, which sets minimum rules on the protection of whistleblowers and aims to provide a helping tool to national and European authorities. The Directive provides minimum standards that will be applicable to every EU Member State. There are common definitional elements regarding the definition of whistleblowers, innovative choices for the channel for disclosure, adequate protection from retaliation, and rights of defense and legal aid for the whistleblower.
According to the European Commission, whistleblowing will lead to effective detection, investigation, and prosecution in cases where EU laws in specific sectors like transport safety and financial markets have been breached. The adoption of the Directive is also a positive step towards changing the EU’s legal approach to whistleblowers. Prior to its adoption, EU rules on whistleblowing were scarce, complex, and sector-specific. Most of them were adopted in banking and finance following the 2009 financial crisis. The Directive is an EU legal act that is solely focused on the protection of whistleblowers, and that fact differentiates it from the previous sectoral provisions.
The adoption of the Directive is a major step towards a model of private enforcement in which whistleblowers become a valuable tool for enforcement, both at the European and national levels. However, adopting it does not come without its challenges. It is the first time that the EU offers such a tool to its Member States. The EU has a general principle that EU law should be effective but it also does not prescribe any specific procedure or enforcement, so the enforcement of EU laws relies upon the Member States. Apart from competition law, where certain rules exist, enforcement relies heavily on the relevant national authorities, which makes enforcement a difficult task. The EU does not work as a federal state but has a sui generis structure: The EU adopts rules and then the Member States should enforce them. In the last few years, the EU has realized that there is not a lack of rules but a lack of enforcement of existing EU rules. Whistleblowers, in that regard, can help enforce rules by reporting wrongdoings.
The EU’s establishment of whistleblowers as an enforcement tool is further complicated by the multi-enforcement structure of the EU, which creates a complex situation for the whistleblower to navigate, as enforcement mechanisms in every country are simultaneously entangled and distinct from the evolution of EU institutions. The Directive also provides only a “partial” enforcement tool, as whistleblowers may only report on breaches of EU law in specific areas that the Directive establishes. In practical terms, this means that Member States have the liberty to transpose the Directive into law (limited to the material scope of the Directive) and, at the same time, to introduce or keep national rules on whistleblowing which may be in contradiction with those of the Directive. This situation creates a complex and confusing environment for whistleblowers, as it is not always easy to discern between EU and national law.
Moreover, the Directive does not establish an EU Office on whistleblowing, which would have signaled the formal legitimacy of whistleblowers. The complexity of the EU legislation is a significant obstacle, especially considering that not all whistleblowers are lawyers or understand the law. An EU Office on whistleblowing would have served as a point of reference: whistleblowers would have the possibility of asking for guidance and information in order to better report their concerns. Also, an EU Office on whistleblowing would have assisted Member States in the implementation of the Directive along with the coordination of cross-border matters.
Furthermore, the Directive fails to distinguish between the right to blow the whistle and the duty, under law, to report wrongdoings. Blowing the whistle is a right that people can choose to exercise (or not). But when there is a duty to report imposed by law, then those who choose not to report may be held liable in civil or criminal court for failure to report. For instance, in cases that involve money laundering and anti-terrorism, there is a legal duty to report concerns, under EU law, to relevant authorities. In the Directive, this duty to report about money laundering and anti-terrorism offenses is conflated with whistleblowing, thus failing to distinguish between right and duty and potentially creating a wrong impression, where someone might falsely believe that they are a whistleblower (and thus protected under the new law) when in fact they are not.
Finally, another challenge of the Directive is the absence of any consideration regarding anonymity and financial rewards. Both concepts are used in the US, but the EU does not consider them important components of whistleblowers’ protection. In Europe, whistleblowers are supposed to report out of a sense of righteousness and civic duty, and not because they will profit from it. Therefore, the EU decided to refuse financial rewards and anonymity as components of whistleblowers’ protection. Concerning financial rewards, the EU had already adopted provisions on financial rewards in the Market Abuse Regulation 2014 and the Prospectus Regulation 2017 (both are EU legal acts regulating the EU financial sector). Despite these provisions (not utilized by any Member State), the Directive is silent on financial rewards. The absence of anonymity and financial rewards may be an obstacle, as some prospective whistleblowers might view the protections provided to them under the new law as significant enough to come forward.
The importance of this new EU effort to protect whistleblowers is undeniable. For the first time, whistleblowers are protected by EU law as legitimate enforcers of the law. Nevertheless, the transposition of the Directive into national laws will face challenges, which should be taken into consideration by legislators, regulators, and whistleblowers.