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International experts - Published: 26 July 2018
Arnaldo Bernardi
Lawyer at the Paris, New York and Milan bars - Paris

Whistleblowers are key tools to uncovering unlawful activities and preventing corporate misconduct. However, according to the 2017 Eurobarometer on Corruption, 81% of individuals experiencing or witnessing corruption indicated that they have not reported it. Moreover, only 47% of the respondents knew where to report a case.

While whistleblower protection laws have been on the rise over the last decade, demonstrating that States recognize the importance and benefits of whistleblowers, employees are still far from being comfortable when it comes to reporting potential misconduct. Companies should therefore take the lead and adopt tailor-made measures to encourage employees to speak up. Internal reporting tools promote the company’s image and credibility, and it is certainly preferable for companies to retain control over and treat whistleblowing reports internally, rather than having an external authority investigate and risk facing expensive fines.

Incentives Afforded to Whistleblowers by National Legislations

A growing number of countries around the world require private companies and public entities to adopt whistleblower reporting tools as part of their compliance programs. For example, in December 2016, France adopted the Loi Sapin II, which established a comprehensive set of whistleblower protection rules. In October 2017, Italy also adopted a whistleblower protection law applicable to both public and private entities. National whistleblower protection legislations unanimously agree that those responsible for receiving alerts must guarantee the confidentiality of the whistleblower’s identity and ensure that they are not subjected to retaliatory measures. Several legislations (including Italy’s) also provide that, when faced with an employee’s claim of retaliation, employers have the burden of proving that they had fair grounds for taking the relevant measures against the whistleblower. In the United States, whistleblowers receive financial incentives proportionate to the amount recovered at the outset of a successful enforcement action resulting from the alert.

The Proposed E.U. Directive on Whistleblower Protection

On April 23, 2018, the E.U. Commission adopted a proposed Directive “on the protection of persons reporting on breaches of E.U. law.” The proposed draft covers breaches of E.U. regulations on, inter alia, public procurement, financial services, prevention of money laundering and terrorist financing, and competition. Under the proposed Directive, Member States will be required to mandate (i) public entities, as well as (ii) private entities with more than 50 employees or an annual turnover of over 10 million EUR to establish internal channels for reporting potential breaches and following-up on reports. These channels will have to ensure the confidentiality of the whistleblower’s identity, proper follow-up on the report, and a timeframe of not more than three months to provide feedback to the whistleblower. Whistleblowers would be protected against dismissal, demotion and other forms of retaliation. The proposed Directive also requires Member States to establish reporting channels to public authorities. As of July 2018, the proposal has not yet been discussed by the E.U. Parliament.

How Can Companies Encourage Whistleblowers to Speak Up

Regardless of the legal obligations imposed by applicable legislations, there are numerous ways companies can encourage their employees to report potential misconduct. These include the following measures, which should be tailored to the company’s structure and operations:

  • Implementing clear and easily accessible policies and procedures for reporting improper or unethical practices that should (i) explain how reports will be investigated, (ii) identify who will be in charge of investigating the alerts, and (iii) explain the protections provided to whistleblowers;
  • Adopting multiple mechanisms for reporting violations, including hotlines, dedicated e-mail addresses and external reporting channels. These reporting mechanisms should ensure the confidentiality of the identity of the whistleblower and allow for anonymous reporting;
  • Ensuring that whistleblowers are protected against retaliation;
  • Providing trainings and awareness sessions to all employees to overcome negative cultural perceptions of whistleblowing and create trust within the organization;
  • Establishing periodic surveys or feedback systems where employees are offered an opportunity to raise any issues; and
  • Dedicating competent personnel and adequate resources to the processing of alerts and establishing a secure centralized platform to collect and store all alerts.

Whistleblower Protection Guidelines

In the absence of applicable comprehensive regulations on whistleblower protection, companies may resort to the guidelines published by international organizations to establish efficient internal whistleblowing systems. These include Whistleblower Protections: A Guide published on June 7, 2018 by the International Bar Association (IBA), which identifies the basic principles behind effective whistleblower regulations and provides guidance to both regulators and private entities. On March 16, 2016, the Organization for Economic Co-operation and Development (OECD) published Committing to Effective Whistleblower Protection. While the OECD report mostly includes proposals to strengthen whistleblower regulations, its suggestions nevertheless constitute a helpful resource to corporations.

Arnaldo Bernardi is an associate in the Anti-Corruption and Internal Investigations practice group of the New York-based law firm Hughes Hubbard & Reed LLP. Arnaldo advises clients on matters involving anti-corruption compliance and white-collar crimes. In connection with his anti-corruption work, Arnaldo’s assistance to clients includes the design and implementation of compliance programs, conducting third-party due diligence reviews and internal investigations, as well as assessing risks under international and national frameworks. Prior to joining Hughes Hubbard & Reed, Arnaldo worked in the Milan, New York and Paris offices of Cleary Gottlieb Steen and Hamilton LLP. Arnaldo graduated with highest honors from the University of Milan, and pursued an LL.M. in International Business Regulation, Litigation and Arbitration at the New York University School of Law. Arnaldo is admitted to practice in Paris, New York, and Milan.

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