The harm caused by tax avoidance, money laundering, corruption or the misuse of data is substantial, yet 85% of respondents to the European Commission's 2017 public consultation expressed the view that workers very rarely report concerns about wrongdoing due to the legal and financial consequences they might face. To address this, the European Union is introducing far-reaching rules for potential whistle-blowers who might be discouraged from reporting their concerns or suspicions for fear of retaliation. It was passed in April 2019 and is expected to be adopted shortly.
Currently, the protection afforded to whistle-blowers differs greatly among Member States, with only ten EU Members having laws that provide for such protection. With the new Directive , the EU aims to set new European-wide standards. The new law will establish safe channels for reporting both within an organisation and to public authorities. It will also protect whistleblowers against dismissal, demotion and other forms of retaliation. In addition, national authorities are required to inform citizens and provide training for public authorities on how to deal with whistle-blowers under the new legislation
Areas covered by the Directive are:
- Public procuremen
- Financial services, the prevention of money laundering and terrorist financing
- Product safety
- Transport safety
- Protection of the environment
- Nuclear safety
- Food and feed safety, and animal health and welfare
- Public health
- Consumer protection
- Protection of privacy and personal data, and security of network and information systems
- Breaches or avoidance of corporate tax
In the UK, the Public Interest Disclosure Act 1998 ("PIDA") already provides protection for whistle-blowers from dismissal or detriment as a result of reporting a "protected disclosure", though it does not require workplaces to encourage whistleblowing. In addition, in the financial services arena, the FCA introduced, in 2017, new self-reporting and whistleblowing rules which encourage employees to speak up and challenge poor practice or unlawful behaviour within their business. UK branches of PRA-regulated banks are expected to have in place a strong framework to facilitate whistleblowing by employees, primarily ensuring that all concerns reported are property investigated with no personal repercussions.
In an interesting case handed down in October 2019, Gilham v Ministry of Justice  UKSC 44, the Supreme Court expanded the whistle-blower protection to the judiciary, following a claim made by a district judge against the Ministry of Justice for detriment following her expressing her concerns over public sector cuts in the justice system. The Supreme Court held that the PIDA protection applied to her and to other noncontractual office holders; if she was not granted the protection that employees enjoyed then this treatment would be incompatible with the European Convention of Human Rights Articles 10 and 14. The judgment arguably allows other non-contractual workers, such as company directors, to benefit from the PIDA protection.
Much of the content of the Directive is already contained in the existing UK whistleblowing frameworks but there are some areas where the Directive goes further, such as the requirement for companies that have 50 or more employees to set up internal and external reporting structures or for Member States to provide free access to independent advice. We shall have to see whether the UK government will adopt the full Directive into domestic law following Brexit.
If so, FIs and D&Os might face an increase in regulatory investigations and civil actions relating to alleged wrongdoing, leading to further notifications to insurers. Such scrutiny may lead to further action by regulators into a firm's systems, controls and corporate governance.
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