Minister of Justice sends whistleblower draft bill for approval


Minister of Justice Kalle Laanet (Reform) has sent a draft bill which would protect whistleblowers in the workplace, and which is aimed at ensuring the protection of those who covertly report violations of the law in public sector institutions, and in private sector companies with more than 50 employees.

The bill relates to an EU directive which Estonia was referred to court over in early 2022 on the grounds of not having adopted the directive's provisions, though it focuses more on the context of domestic legislation.

The approval round involves the relevant stakeholders providing their feedback, before the bill is sent to the Riigikogu for its readings.

The draft bill's explanatory memorandum reads: "The bill creates a framework for processing reports of violations received through professional activities, and for providing follow-up measures and feedback in those cases, plus protecting a whistleblower."

"The bill provides for the personal and substantive scope of protection of a whistleblower, the conditions and extent of receiving said protection, and the ways and means of notification," the explanatory memorandum goes on.

A three-level notification system would be created under the terms of the bill, including internal and external notification and disclosure.

According to the explanatory memorandum, this would then result in the protection of whistle-blowers from coming under pressure, and preserve confidentiality.

The bill establishes institutions and legal entities which must in turn create an internal notification channel for confidential notification about violations.

Violator themselves should be notified first

The bill's explanatory memorandum stresses that, since the purpose of notification of a violation is to eliminate that violation as soon as possible and with minimal public attention, the institution or company where the violation is taking place or has taken place, or the competent state authority relevant to the elimination of the violation, should be notified in the first place.

When publicly notifying the prerequisite for receiving protection would be prior notification to the institution in question, as this, it is argued, would protect the potentially infringing institution or company from potential reputational damage which may accompany the unnecessary disclosure of the violation before a substantive assessment of the violation is made, the explanatory memorandum states.

In addition, it is easiest for the allegedly infringing institution or company to eliminate the violation before it becomes public.

Disclosure should be monitored, on the one hand to ensure public interest and freedom of expression, and on the other hand also to protect the rights of those persons affected by the notification and to prevent abuse of disclosure.

"The effect of the change is to create a safe way to report violations, which in turn helps to eliminate violations at the earliest possible stage, thus avoiding unnecessary publicity, possible damage to reputation, and damage to people and property," the explanatory memorandum goes on.

"This, in turn, can increase the number of notifications of violations; this in turn increases compliance with the law. Conversely, notification of violations helps to avoid situations arising whereby a possible violation is not responded to appropriately and in a timely fashion, such that if the violation persists, the public is immediately notified, leading to the interests and reputation of all parties being harmed. This means the bill provides indirect protection also in respect of the unnecessary disclosure of a violator's interests."

Economic impact remains small

The bill's explanatory memorandum also states that early detection of violations provides companies with the opportunity to eliminate them at , which helps to prevent or reduce possible financial and reputational damage that may occur as the violation worsens.

If transparency increases for the general economic environment and the risk of corruption decreases, the administrative burden for the company increases, it is stated at the same time.

However, the workload and costs will be likely to rise quite significantly, the memorandum goes on; a large number of notifications materializing, or not, cannot be foreseen, it is argued.

This opinion is also based on the experience in implicating similar processes in neighboring Latvia, where 75 notifications were received in about half a year, but just half of these required further attention.

Considering the creation of a corresponding secure communications channel is, if the law enters into effect, required from companies with more than 50 employees, of which there are currently 1,343 actively operating in Estonia – only around 1 percent of the total – they make up only one percent of all companies, the overall cost to the economy would therefore be small.

In the approximate calculation of costs incurred by a company, it is taken to be the case that this may mean labor costs of about €270 incurred to the company in question in one month, but in addition, the establishment of a notification channel requires the creation of at least one e-mail address and the secure option to transmit notifications in writing, over the phone and orally.

"The state can reduce the scope of the impact at this point by helping companies create notification processes and by providing advice," the explanatory memorandum adds.

The law may slightly increase the burden on law enforcement agencies

According to the explanatory letter, the law may slightly increase the number of registered offenses and increase the burden of law enforcement agencies and courts proportionately.

"There may be some increase in the number of crimes, but since large-scale notification of violations in the professional context cannot be predicted, the scope and significance of the impact is small. Rather, the impact is positive, as it directs organizations to law-abiding behavior, which reduces the number of violations in the long term," the document says. "To counter the increase in malicious notifications, the bill provides for a sanction for knowingly making an incorrect notification, which is why it is unlikely that malicious notifications will increase," it is added at the same time.

Estonians do not tend to report violations

The explanatory letter also points out that, according to studies, Estonian society does not tend to report violations.

"The legacy of the Soviets probably plays a role in this, due to which the so-called complaint and notification of an occupational violation are confused. The latter is the notification of a violation of the law, where someone may be harmed - for example, environmental pollution, violation of fire safety requirements, bribery, sexual abuse," the document states.

At the same time, it is argued that when faced with corruption allegations, 51 percent of Estonian residents and 28 percent of businesses did not tell anyone about the incident. Some told friends or colleagues: Fifteen percent of entrepreneurs and 20 percent of the general population operated this way. Barely 1 percent of respondents reported the violation to law enforcement.

As to the reasons for this: "Estonians fear more than others that if corruption is reported, it constitutes some sort of betrayal. 26 percent of those in Estonia think along these lines, compared with 18 percent on average in the EU. As a parallel, reporting is also low in other areas, for example, 83 percent of Estonians do not report domestic violence to law enforcement of the population, while the average in the European Union is 64 percent," the explanatory letter states.

Bill based on EU law

While the bill is related to an EU directive on the protection of persons reporting violations of EU law, and whose purpose is the protection of those reporting violations of EU law, the explanatory letter of the draft states that its starting point is primarily the protection of the domestic Estonian legal order, and the draft does not in fact focus narrowly on reporting violations of EU law.

"Assessing the influence and importance of the referenced areas at state, business and individual levels, it is difficult, if not impossible, to find arguments why these areas should be less protected domestically, compared with under EU law. On the contrary – for a small country, corruption-free, innovation-friendly, with equal opportunities an honest and transparent business environment and a secure social organization that protects and values ​​basic rights, values ​​that directly affect the country's competitiveness, sustainability and the increase of national wealth," the explanatory letter says.

At the same time, it has been stated that the law would increase the credibility of Estonia as a destination country for investment, as it provides assurance that, if necessary, violations will be dealt with efficiently and quickly, and the whistle-blower is guaranteed confidentiality and protection.

"This makes it crucial to take care of the business environment and social values ​​within the country via equivalent and effective legal levers, as the EU does in maintaining and protecting union-wide interests," the explanatory memorandum.

The European Commission, which is required to ensure that member states adopt the regulations agreed at EU level, already in January of last year initiated an infringement procedure against Estonia for delaying the implementation of the so-called whistle-blower directive.

The Ministry of Justice sent the draft bill, signed by Minister of Justice Kalle Laanet, to all ministries for their approval and for expressing their opinions to the Supreme Court, the county courts and administrative courts, the Chancellor of Justice, the State Prosecutor's Office, the Estonian Bar Association (Eesti Advokatuur), the Financial Supervisory Authority (finantsinspektsioon), the University of Tartu, Tallinn University of Technology, Tallinn University, the NGO Corruption-Free Estonia (Korruptsioonivaba Eesti), the Estonian Chamber of Commerce and Industry (Kaubandus-Tööstuskoda), the Association of Estonian Cities and Rural Municipalities (Eesti Linnade ja Valdade Liit), the Labor Inspectorate (Tööinspektsioon), the Estonian Journalists' Union (EAL), the Estonian Newspapers' Union (confusingly also the EAL, the Eesti Ajalehtede Liit), the Estonian Employers' Central Union (Eesti Tööandjate Keskliit) and the Estonian Banking Association (Eesti Pangaliit).

Feedback on the draft is awaited within 10 days.

Read the article at ERR.