While there are a number of ways in which organizations may become aware of potential wrongdoing internally, perhaps the most significant for its legal and compliance teams is internal reporting, or "whistleblowing," by employees or other related individuals. In such circumstances, employers may be bound by certain obligations to the whistleblower that affect the manner in which allegations are addressed, including by providing the reporting individual with certain legal protections. While not a comprehensive list, the below table sets out the key considerations arising out of a whistleblowing situation. The table also provides a comparative view of these issues as between the United Kingdom, United Arab Emirates, European Union, and United States, each of which differ in their approach to a greater or lesser extent.
In the UK, whistleblower protections are provided under employment law. The scope of what is potentially a protected disclosure is, however, very wide indeed. Employers are subject to legal obligations, chiefly concerned with protecting whistleblowers from detriment or dismissal; though adherence to the government's advice with respect to good practice is important to protect the company from potential claims by employees. As compensation for whistleblowers is uncapped, allegations of being dismissed for raising concerns are increasingly being used to leverage a departing employee's negotiating position. Companies regulated by the Financial Conduct Authority ("FCA") are subject to additional obligations with respect to the maintenance of a whistleblowing policy.
UNITED ARAB EMIRATES
The UAE has three different legal systems—one Arabic language, civil law, federal system covering the majority of the country with some variation between the commercial laws of each of the seven different Emirates (frequently referred to as the "onshore" legal system); and two separate English language, common law systems in the "offshore" financial free zones in Dubai and Abu Dhabi, respectively. Onshore UAE law does not have any stand-alone whistleblowing protections, and it is important to note that there are several onshore laws (commercial and penal) that provide a high degree of confidentiality protection against the disclosure of company information. The two offshore legal systems, on the other hand, have recently adopted whistleblower legislation (in the case of the Dubai International Financial Centre ("DIFC")) and guidance (in the case of the Abu Dhabi Global Market ("ADGM")) that require and encourage, respectively, a high degree of protection for whistleblowers who report concerns in good faith.
On December 16, 2019, the EU adopted EU Directive 2019/1937 (the "EU Directive") requiring all member states to implement national legislation imposing certain minimum standards with respect to the protection of whistleblowers. This includes protection from retaliation, the requirement to publish a whistleblowing policy, and directions as to the time in which an internal report must be dealt with. Prior to the EU Directive, some individual member states such as Germany, France, and the Netherlands had preexisting national legislation that provided limited protection to whistleblowers; others, such as Spain, provided no legislative protection to whistleblowers. While many member states are yet to pass legislation to effect the EU Directive's minimum requirements, as the deadline for transposing the EU Directive has now passed, this note focuses on the requirements as imposed by the EU Directive. Corporates with a trans-European Union presence should ensure that EU Directive-compliant systems are in place in all EU countries in which they have a presence.
UNITED STATES OF AMERICA
The U.S. system diverges significantly from those of the other jurisdictions covered by this note in the extent to which government agencies are entitled to offer financial incentives to individuals to encourage the reporting of misconduct. In this respect, the U.S. has adopted a radically different approach to the UK, EU, and UAE by permitting government agencies such as the Securities and Exchange Commission ("SEC") to provide payouts to whistleblowers whose reports lead to successful enforcement action. The use of incentives reflects a proactive approach to enforcement by encouraging individuals to make external reports. Additionally, U.S. regulators generally take a very harsh view regarding any employer actions that may be considered as restricting an individual's ability to report issues to the government or may be perceived as retaliation against an individual who claims whistleblower status.
While this note focuses on the SEC's whistleblower program for the sake of comparison to the other systems addressed by this note, readers should be aware that the U.S. also has other whistleblowing laws, regulations, and policies, at both the federal and state level, that are outside the scope of this note. Please do not hesitate to contact us for more information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.