Introduction

Whistleblowing is something we encounter more frequently than it may seem. Remember Al Pacino
in the film Serpico, where he played the part of a policeman, who refused to join in the practice of his colleagues and accept bribes from New York criminals. It is not only the topic of famous Hollywood movies such as Serpico or the equally popular Erin Brockovich, but also of cases known from the media, such as the Panama Papers or Cambridge Analytica. Even the covid-19 disease was brought to public notice due to Chinese doctor and whistleblower Li Wen-liang.

At present, unlike for example the United States, where whistleblowing is a common part of corporate culture, regulation of whistleblowing has no tradition in Europe and its treatment in the individual EU member states is currently not unified and does not have sufficient quality. The European Union is reacting to this with its directive no. 2019/1937[1], which is intended to set up the minimum standards for the “reporting” policy. In this article, we will speak in greater detail about what not to forget in its implementation and how best to fulfil the requirements of this directive.  Whether you are a proponent of whistleblowing, or it does not quite resonate with you, the legislation must be respected, a suitable way for its implementation must be found and mechanisms friendly to both parties, i.e. the whistleblower and the potentially reported, need to be created.

Whistleblowing from the perspective of European law

The aim of whistleblowing, as treated in the directive, is the protection of public interest and prevention of negative effects of especially economic crime on society. It does not apply to complaints of personal nature, reports of bullying harassment etc. Its object is therefore the breach of the law on public procurement, financial services, products and markets and prevention of money laundering and terrorist financing, safety of products and their compliance with the legislation, safety of transport, protection of the environment, nuclear safety, public health, consumer protection, protection of privacy and personal data and others.

Whistleblowing and authorised entities

The essence is reporting action, which is in conflict with one of the above-mentioned areas, both in the public and in the private sector. According to the directive, the whistleblowers are primarily workers, i.e. from the perspective of European case-law persons, who, for a certain period of time, perform services for and under the direction of another person, in return for which they receive remuneration The provisions do not only apply to workers, though. A relatively wide range of entities is included.  It also includes for example self-employed persons, shareholders, persons operating in managerial bodies of legal entities, but also volunteers or trainees. All whistleblowers are granted the same protection against the risks that may result for them from whistleblowing.

Why is whistleblowing needed?

The need for whistleblowing is based on the fact that breach of law in the above-mentioned areas is often concealed from law enforcement authorities and the necessary information is difficult to access. Internal control on the part of employees and other persons thereby represents an efficient tool for overcoming the information asymmetry and handling breach of law within the structures of companies and institutions.

Internal and external reporting

According to the directive, internal reporting channels are to be created individually in each of the obliged entities, but the establishment of an external unit coordinated by the state is also expected. The whistleblower may choose, which of these channels he will turn to. It is desirable in the interest of the entities subject to this legislation to have a well-functioning internal system. For the whistleblowers, too, it is no doubt more comfortable and in terms of evidence, it is less demanding to turn directly to the given company. Surveys from the United States show that only 18 % of whistleblowers choose reporting outside the company as their first option. Only after internal reporting fails, whistleblowers use external means in 84 % of the cases.[2] If there is an option for capturing the risks endangering public interest internally, we recommend doing so for the protection of good reputation, too, which is very valuable as well as very vulnerable. Considering the fact that a not insignificant percentage of whistleblowers uses the internal way first, companies and institutions should be prepared for internal implementation of whistleblowing sufficiently.

What to keep in mind when creating an internal reporting system?

The first step is the creation of a suitable platform. It is possible to create a purely internal channel, use the current compliance or similar department, or an external service. Reporting may then take place by means of electronic forms, a telephone line, personal meeting or postal correspondence. Selection of a suitable platform should derive from the size of the company as well as the structure of employees and other persons. In international companies, it is necessary to keep the different language versions in mind and to ensure availability reflecting time zone differences. In all cases, the identity and position of the whistleblower needs to be protected. An efficient tool is also to ensure legal consulting for potential whistleblowers regarding questions relating to reporting.

If a report is made, first the identity of the whistleblower and the collected data need to be safeguarded in a safe repository. Then it is necessary to evaluate, if breach of law has occurred, and to adopt appropriate measures. The approach to all reports should be the same and all should be subject to the same review. The whistleblower should be familiarised with the course of this proceeding on time, the directive sets a maximum of 3 months as the adequate deadline. Shorter deadlines increase the confidence of whistleblowers in the corporate reporting system.

Czech legislation

EU member states are obliged to transpose the directive by 17 December 2021. By this date, Czech legislation must therefore ensure provision of guarantee to whistleblowers against retaliatory measures[3] when reporting illegal action. The concept of whistleblowing continues to evoke negative connotations in our environment, unfortunately, and it is therefore necessary to improve the way, in which whistleblowers are perceived, and to increase their rights.

There are currently two draft bills for protection of whistleblowers in the Chamber of Deputies – one from the government (proposed by the Ministry of Justice)[4] and one from the MPs[5]. According to the government draft bill, an obligatory internal reporting system is to be introduced for specified entities (in addition to public authorities for example also for employers with a minimum of 25 employees on average in the previous calendar quarter), as well a specialised body of the Ministry of Justice, which will serve not only as an external reporting place, but also a place for information and consulting.

According to the explanatory memorandum, protection of the whistleblowers should consist in transferring the burden of proof to the defendant, among other things. If whistleblowers encounter retaliatory measures and defend themselves at court, it will be up to the person reported, who allegedly adopted the retaliatory measure (i.e. the defendant), to prove that this was not a retaliatory measure. Reported persons may defend themselves against untrue reporting at court or by means of a criminal complaint for defamation or false accusation.

The MPs draft bill introduces obligatory establishing of internal reporting channels especially for larger institutions in the public sector (e.g. the state or its organisational units, public university, health insurance company). For other employers, it leaves the establishment on voluntary basis. Unlike the government draft, the MPs draft reckons with the creation of a job at the Public Ombudsman to serve as an informative and consulting body. Instead of an external reporting place, the whistleblower will turn to law enforcement authorities or the respective administrative bodies.

Conclusion

We can already see a certain degree of protection of whistleblowers in the Czech legislation. A complex treatment of whistleblowing is missing in our legal system, despite many attempts to implement whistleblowing in Czech law. It is now to take place through the EU directive, which provides an elaborate basis and gives our lawgivers the minimum standards. The actual need for and benefit from the new complex legal treatment of whistleblowing for the Czech legal environment is still a question, however, and we can only wait for the final version of the act on protection of whistleblowers and its application in practice.

[1] Directive (EU) 2019/1937 of the European Parliament and Council 2019/1937 of 23 October 2019 on the protection of persons who report breaches of Union law. Available here.   
[2] Supplementary report to the National Business Ethics Survey (2011). Available here.
[3] According to the directive, retaliatory measure is any direct or indirect action or omission that occurs in the work context, resulting from internal or external reporting or public disclosure, which causes or may cause the reporting person unjustified detriment.
[4] Available here.
[5] Available here.