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Increased and Uniform Protection is Coming: EU Adopts New Rules Protecting and Encouraging Whistleblowing

Increased and Uniform Protection is Coming: EU Adopts New Rules Protecting and Encouraging Whistleblowing

Austria
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Scandals from Danske Bank to LuxLeaks and the Panama Papers would never have come to light were it not for insiders who dared to expose major wrongdoings within companies and organisations. Until recently, protection of whistleblowers in the EU has been fragmented across Member States and even across policy areas. The meagre protections granted to whistleblowers have been subject to constant criticism.

In the wake of important revelations by whistleblowers, the EU Commission proposed a new directive in 2018 to protect and encourage whistleblowing. After lengthy negotiations, the EU Parliament adopted a draft of this new directive ("Directive") on 16 April 2019 with the following cornerstones:

1. What type of reporting will be protected?

The proposed Directive grants protections for persons reporting on breaches of various EU rules in areas like public procurement, financial services, AML or data protection. It also applies inter alia to breaches relating to EU competition rules and breaches harming the EU's financial interests.

2. Who will be protected?

The proposed new rules provide protection not only for whistleblowers, but also for facilitators, third persons connected with the whistleblower (e.g. relatives) and legal entities that the whistleblower owns, works for or is otherwise connected within a work-related context.

3. What are the prerequisites for protection?

Protection will be granted if the whistleblower (i) adheres to a certain "reporting scheme" and (ii) acts in good faith:

The whistleblower should generally report via internal reporting channels, but may also report externally to the authorities. Under certain conditions it is also permitted to publicly disclose the information, for example via web platforms or social media.

The whistleblower must also have had reasonable grounds to believe that the information reported was true at the time of reporting and that the information fell within the scope of the Directive.

4. What type of protection will be offered?

The Member States will take the necessary measures to prohibit any form of retaliation, including threats and attempts at retaliation, whether direct or indirect. This includes suspension, dismissal or equivalent measures, discrimination or unfair treatment.

Furthermore, the proposed Directive provides for measures to support whistleblowers, such as public access to independent information and advice on whistleblowing and protection measures free of charge and access to legal aid in criminal and cross-border civil proceedings. In addition, whistleblowers may receive full compensation for damages suffered under certain conditions.

5. Limitation of scope

The proposed Directive will not affect the protection of classified information, legal privilege or rules on criminal procedure under EU or national law. It should also serve only as a minimum standard and would be subordinate to mandatory sector-specific rules.

6. Timeframe and implementation

Member States will have to implement the Directive into local law within two years after its adoption. Thus, its actual implementation into local law remains to be seen. In addition, the proposed Directive contains a reporting, evaluation and review process on EU level.

7. Obligations for companies

The proposed Directive formally addresses the Member States which need to adopt local laws to implement the requirements of the Directive. However, it contains various obligations which will in fact be highly relevant for companies.

Most important of all is establishing internal reporting channels according to the standards of the Directive. Basically, legal entities in the (i) public sector and (ii) private sector with 50 or more employees would generally need to establish such reporting channels, although under certain conditions Member States may also impose this obligation on private legal entities with less than 50 employees. In addition, the affected companies must implement internal structures to handle reports accordingly and give the whistleblower feedback within three months at the latest.

While the Directive is likely to massively strengthen the position of whistleblowers, it will also increase compliance needs for companies.

By Christoph Haid, Partner and Michael Lindtner, Associate Schoenherr

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