Linka Toneva, PhD
11 April 2017
When in the autumn of 2010 Antoine Deltour, a French employee of the consultancy giant PricewaterhouseCoopers came upon evidence of preferential tax rulings of the Luxembourg government in favour of multinational companies, he was surely aware of the legal and financial risks he will undertake if he blows the whistle to the public and the media about his findings. However, what he could not have foreseen is that his actions will be among the main reasons for the European institutions to urgently commence consultations for establishing European regulations in the area of whistleblower protection.
After serious research and contacts, in the fall of 2014 Deltour, together with his colleague Raphaël Halet and with the cooperation of the International Consortium of Investigative Journalists, unveils publicly hundreds of secret preferential tax rulings between Luxembourg and multinational companies, some of which have managed to obtain the obscenely low tax rate of 1%. Ambitious to retain its status of a “tax haven” in the heart of Europe, Luxembourg embarks on a tough legal attack against the whistleblowers. The prosecution insists that the two consultants must be convicted to 18 months in prison for theft and uncovering commercials secrets and confidential information. The main collaborating journalist Edouard Perrin is also brought to court and threatened by a possible financial fine.
The trials on these scandalous disclosures, known as LuxLeaks, have finally concluded in March 2017 with a suspended 6-month jail sentence for Deltour and fines of 1500 and 1000 Euro for him and Halet accordingly. Perrin is acquitted. During the trail European citizens from many European cities demonstrated their gratitude towards the informants with petitions and demonstrations, appreciating their courage to unveil the schemes in which large companies save millions from tax evasion while citizens endure austerity in times of financial and economic crisis.
LuxLeaks may be a closed case but the resonance from similar scandalous disclosures, including the Panama Papers in 2015, will remain until European institutions establish clear regulations regarding whistleblower protection when wrongdoings are disclosed to protect public interest.
It is exactly in this context that in March 2017 the European Commission has initiated a public consultation on whistleblower protection. The consultation is an instrument used by the EC to assess the attitudes of European citizens and organizations regarding a particular policy area before it implements its right of legal initiative in that sphere.
The main argument of the European Commission for starting the public consultation on the topic of whistleblower protection is the need to guarantee the financial interests of the EU and the European taxpayers by unveiling cases of fraud, tax evasion and other misuse of public funds. The EU acquis currently contains certain rules for protection against repression in various spheres including audit, money laundering, trade secrets and market abuse. Some Member States have national regulation in place to protect whistleblowers (France, Ireland among others). In other countries however, for example in Bulgaria (but also in other Member States) this issue is almost entirely outside the agenda of politicians and institutions and is partially dealt with in the Administrative Procedural Code and the Law on Prevention and Ascertainment of Conflict of Interest. These rules however do not present effective mechanisms for whistleblower protection and this remains a point of criticism in the annual reports on the progress of Bulgaria in implementing various international conventions (UN Convention against Corruption, the OECD Anti-Bribery Convention and others).
Such discrepancies in the legal framework within the EU have direct negative impact on the rights and freedoms of European citizens (including freedom of speech), particularly in their capacity of employees on the common European market. This is why the EC is addressing the citizens and stakeholders with a set of questions focused on the key reasons why people will not disclose information on wrongdoings, what the possible benefits of clear regulations on whistleblower protection in the private and public sector could be, as well as what its potential drawbacks are.
The topic is rather contentious – should disclosures always be disinterested, should there be a European fund for support of whistleblowers, should they receive remuneration for their disclosures?
Within the framework of the ongoing consultation mechanism the EC also allows citizens to say what the scope of a future EU regulations in this area want to be – horizontal or sectoral, a combination of both or even a combination of EU and national rules. Sources in Brussels claim that at present an EU Directive on whistleblower protection seems the most probable choice. Representatives of European trade union organizations have also stated their support for increasing the level of protection for employees who disclose information on wrongdoings. Civic organizations, working in the area of transparency have also supported horizontal EU-level rules. In contrast, opposition to the rigorous supranational approach can be expected from the large employer and industry organizations, especially if the legislation will impose mandatory requirements for the companies in the private sector (ex. implementing internal disclosure mechanisms, consultation and employees and compensation in cases of reprisal). This strong polarization makes it ever more important for citizens to take part in the consultation by responding to the questionnaire of the EC which is easily accessible on all EU official languages on the website: https://ec.europa.eu/eusurvey/runner/d20e80a1-fa7d-41a4-9f9e-2725261636b8?draftid=21d9f441-0109-4397-8030-7171a9a6bc3f&surveylanguage=BG
The financial effects of non-disclosure of wrongdoings that threaten or harm public interest when employees fear repressions like dismissal or trial, are clear. A 2016 study of over 2400 cases of disclosures in 114 countries showed that 40% of financial fraud in the public and private sector have been unveiled by whistleblowers and their courage to blow the whistle. Whether these employees will receive punishment or praise – this is to be decided today by European citizens by participating actively in the European public consultation, open until 27 May 2017.