Documents considered by the Committee on 27 February 2019 Contents

1Whistleblowing and breaches of EU law

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industrial Strategy Committee

Document details

Proposal for a Directive of the European Parliament and the Council on the protection of persons reporting on breaches of Union law

Legal base

Articles 16, 33, 43, 50, 53(1), 62, 91, 100, 103, 109, 114, 168, 169, 192, 207 and 325(4) TFEU and Article 31 of the Euratom Treaty; ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(39695), 8713/18 + ADDs 1–3, COM (18) 218

Summary and Committee’s conclusions

1.1“Whistleblowing” is commonly understood to be the act of speaking out and disclosing serious wrongdoing, usually by employees. EU law on whistleblowing already applies in some areas such as financial services, transport safety and environmental protection. The Cambridge Analytica,1 Lux Leaks,2 Dieselgate3 and Paradise/Panama Papers4 scandals have all highlighted the importance but also the vulnerability of whistleblowers. In their wake, the Commission is proposing this Directive (document (a)) to strengthen and extend protection for whistleblowers across the EU who report breaches of a wide range of EU legislation. As this is a minimum harmonisation proposal, it is open to Member States to legislate for higher levels of protection. We set out a full account of the proposal and the Government’s view of it in our last Report of 20 June.5

1.2Irrespective of when the proposal may be adopted, the deadline for implementing the Directive once adopted is currently drafted to be 15 May 2021. This means that as things currently stand the UK would not have to implement the proposal,6 either in the case of “no-deal” or of a negotiated exit where the implementation period is not extended beyond 31 December 2020. However, we considered last time that the UK may either have to align with the proposal as part of the core labour or competition provisions of an EU-UK free trade/other agreement or may choose to do so as part of the Prime Minister’s commitment to build on workers’ rights after the UK’s exit from the EU.

1.3Historically, the UK has led the EU in terms of the legal protection it affords to whistleblowers (see the Public Interest Disclosure Act 19987 and the Employment Rights Act 1996). However, the Government has not supported the proposal. As indicated in its Explanatory Memorandum in June, the Government considers that a non-legislative measure should have first been attempted by the Commission. It highlights the cost and burden on business of setting up internal reporting procedures (the main difference between the proposal and the current UK legal framework). We considered these concerns engaged the proportionality of the proposal rather than raising any questions about subsidiarity.

1.4We last reported on 16 January on the Government’s letter of 21 December and its awaited responses to Committee questions. The Government did not indicate any substantial progress in Council negotiations, despite the European Parliament (EP) having agreed its position. In addition to keeping us updated on developments in the negotiations and any progress towards the adoption in Council of a General Approach, we asked the Government for further information about:

1.5We had previously asked during our scrutiny of the proposal to be kept informed of any developments in discussions in the Council concerning the proposal relying on multiple legal bases.8

1.6We also noted the Government’s comments about the Privacy International case concerning the interpretation of the national security exemption provided in Article 4(2) TEU. We had already asked for an update on the progress of this case in a different chapter of the same weekly Report on the e-Privacy Regulation.

1.7By way of general update, the Parliamentary Under Secretary of State and Minister for Small Business, Consumers and Corporate Responsibility (Kelly Tolhurst MP) in her letter of 11 February now informs us that:

1.8In view of the March Council, the Minister asks us to consider granting a scrutiny waiver or clearance. Connected with this, she says that the Government will continue to press for amendments to the proposal during trilogues.

1.9Turning to concerns we have previously raised, the Minister confirms that:

1.10The Minister then sets out the Government’s position on proposed General Approach text. She prefaces her comments by reiterating that after twenty years of whistleblower protection in the UK, the Government still considers that any action at EU level should be proportionate and accommodate the existing different practices and systems at national level.

1.11She first criticises the hierarchical approach that the proposal takes to reporting of wrongdoing. She explains that:

1.12We thank the Minister for her letter. We note that while the Government technically observed the spirit of our scrutiny resolution reserve in COREPER when the UK representative abstained on 25 January, it is regrettable that there was insufficient time for us to be briefed in advance of that meeting. We are unclear though why the UK representative did not vote against the proposal in that forum, in view of the Government’s ongoing concerns.

1.13As the Minister notes, we have asked previously about the use of multiple legal bases for the proposal. She reports that Member States are concerned about what this means for the use of different legislative procedures. We further note that she says that “the rapid pace of negotiations has prevented a full consideration by the Government of all the different views expressed during recent negotiations”. In general terms, we understand from press reports10 that there has been a Council Legal Service opinion about the multiple legal bases (as proposed originally and additional legal bases proposed during negotiations) and the potential incompatibility of respective legislative procedures. We have also read the legal opinion11 of the EP’s Legal Affairs Committee (JURI). We recognise that the Government does not, as a matter of confidentiality, comment on Council Legal Service Opinions. But we do ask the Minister to provide a more detailed account of the Government’s own view of the different legal issues arising from multiple legal bases on which the proposal might rely, as it changes during the negotiations.

1.14We do not grant the Government a scrutiny waiver for 7–8 March Council This is because it would be inconsistent with the Government’s ongoing concerns about the proportionality of the proposed General Approach text or our need for further information about the legal integrity of the text arising from the use of multiple legal bases. We have to bear in mind that this proposal could impact on the UK in a “deal” scenario where the transition/implementation period is extended beyond 31 December 20. We also do not consider it likely that since the General Approach vote effectively will be rubberstamping a text already agreed in COREPER that a scrutiny waiver could facilitate Government efforts to obtain any favourable developments in that text. Following the Council meeting in March, we ask the Government to report on the outcome and on any progress made during trilogues.

1.15In connection with the request in paragraph 1.14, specifically we would like to know what improvements, if any, the Government is successful in influencing during trilogues. We understand that there may be some common ground between the Government’s position and the EP position.12 This in particularly in relation to the EP’s amendments on the threshold for small businesses to put in place internal reporting channels and procedures for whistleblowers (amendments to Article 4)13 and on a two-tier reporting system like that already existing in the UK (of employers and competent authorities (amendments to Article 13).14 We ask the Government to confirm whether our understanding is correct.

1.16We retain this document under scrutiny but draw it and the chapter to the attention of the Business Energy and Industrial Strategy Committee.

Full details of the document

Proposal for a Directive of the European Parliament and the Council on the protection of persons reporting on breaches of Union law: (39695), 8713/18 + ADDs 1–3, COM(18) 218.

Previous Committee Reports

Fifty-first Report HC 301–l (2017–19) chapter 2 (16 January 2019); Thirty-second Report HC 301–xxxi (2017–19), chapter 1 (20 June 2018).


1 Facebook and data analytics firm Cambridge Analytica have been accused of harvesting and using personal data to influence the outcome of the US 2016 presidential election and the UK’s referendum on EU exit. See the oral evidence session, Christopher Wylie, 28 March 2018 held as part of the DCMS Committee’s inquiry into “Fake News”.

2 See BBC website, ‘Luxleaks whistleblower Antoine Deltour has conviction quashed’ 11 January 2018. In 2014 two whistleblower employees leaked confidential information concerning PricewaterhouseCoopers dealings with multinational companies in relation to tax rulings in Luxembourg between 2002 and 2010. They were originally both convicted by the Luxembourg courts, but one had his conviction overturned in January 2018.

3 See BBC website, ‘Volkswagen: The scandal explained’ 10 December 2015. The German car manufacturer Volkswagen has since admitted cheating diesel emissions tests in the US.

4 A House of Common Debate Briefing paper explains that Paradise papers consisted of “material …leaked from two offshore service providers and 19 tax havens’ company registries” and reported by some of the UK press “reiterating public concerns as to the scale of tax avoidance and evasion, and the ability of offshore jurisdictions to facilitate these activities”. This followed the publication in the previous year of the ‘Panama Papers’—a leak of financial records from Mossack Fonseca, a law firm that had provided advice on establishing offshore companies to a wide variety of politicians, celebrities and wealthy people.

5 Thirty-second Report HC 301–xxxi (2017–19), chapter 1 (20 June 2018).

6 Nor continue it as retained EU law under the EU Withdrawal Act 2018.

7 But the Public Interest Disclosure Act 1998 is now over twenty years old.

8 See our Thirty-second Report HC 301–xxxi (2017–19), chapter 1 (20 June 2018).

9 We refer to the conclusions in our Report of in which we disagreed with the Minister that there were subsidiarity concerns in respect of this proposal.

10 “Whistleblowers could lose out in EU tax shakeup”, Politico 20 December 2018.

11 EP’s Legal Affairs Committee’s opinion on the legal basis for the proposal for a directive of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law

12 Report by the EP’s Committee on Legal Affairs, 27 November 2018.

13 The EP JURI Committee has proposed a new paragraph 3.3. to the original text of Article 4 of the proposed Directive. This would provide derogations from the Article 4 requirement to set up internal reporting channels and procedures. It provides:
“3a. By way of derogation from points (a) and (b) of paragraph 3, Member States may exclude from the legal entities in the private sector referred to in paragraph 1 the following private legal entities:
(a) private legal entities with fewer than 250 employees;
(b) private legal entities with an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million”.

14 The amendment would extend whistleblower protection to those who have reported internally OR externally OR both, assuming all other conditions for protection have been satisfied. In other words, the hierarchy of reporting currently set out in Article 13 of the Commission’s original text would not apply.




Published: 5 March 2019