21st March 2018
The government will shortly bring new EU rules on industrial espionage into UK law. But these rules, drawn-up with heavy corporate influence, could create a chill-effect on future corporate whistle-blowers and those who report their stories.
The LuxLeaks scandal was one of a series of leaks that have exposed the tax shenanigans of rich and powerful individuals and corporations around the world – and the official collusion around them. In 2014, journalists exposed the widespread use of corporate tax ‘optimisation’ schemes in deals struck between the Big4 accountancy firms and the Luxembourg government. More than three years on, no company has been prosecuted. But the two whistle-blowers and a journalist were prosecuted and faced years of legal uncertainty. One of the arguments used by the prosecutor to demand their conviction was that the leaked information was a trade secret.
The UK government is currently in the process of bringing the 2016 EU directive on “trade secrets protection” into national law. The UK’s draft regulations give businesses new rights to sue and extract financial damages from people who disclose companies’ internal information. But will journalists, whistle-blowers, and trade unions acting in the public interest also be caught up?
That concern has prompted more than 20 UK civil society groups to to urgently write to the relevant government minister, Sam Gyimah.
The little-known directive was drawn up by officials in the European Commission working hand in hand with powerful business lobbyists. Their agenda focused on industrial espionage and protecting commercial secrets such as recipes for products and client databases. But some of the confidential information held by corporations is also highly relevant to the public interest, like reports about pollution, plans for mass redundancies, or LuxLeaks-style tax avoidance agreements. The EU’s Trade Secrets Directive introduces new rules to protect legitimate commercial secrets but it could also be used to protect the confidentiality of information that should be made public.
And by the time Members of the European Parliament got to see it, the corporate influence on the draft of the Trade Secrets Directive was palpable, and while MEPs managed to introduce some safeguards, significant concerns remain.
The draft regulations do not include any of the important exceptions that were so hard-won by MEPs, include allowing the disclosure of trade secrets on the grounds of freedom of expression; when revealing wrongdoing or illegal activity; and when disclosures are made by workers to their trade union representatives. Instead, there is just a general requirement for judges to consider “the public interest” and “the protection of fundamental rights” when they consider an alleged case of trade secret infringement.
The UK government argues that it does not need to introduce any of the EU safeguards, because they are already present in UK law. But is that sufficient?
Unlike most other EU member states, the UK does offer some protection for whistle-blowers through the 1998 Public Interest Disclosure Act, but this is imperfect and needs improvement to offer robust protections for whistle-blowers who are acting in the public interest. There is a real concern that if the Trade Secrets Directive does not actively include clear protections for whistle-blowers, it will create a ‘chilling effect’ which could deter future corporate whistle-blowers from coming forward in the future.
Similarly, trade union representatives who legitimately disclose information about a company’s activities to other employees or the media should be concerned, as their hard-won exception agreed at the EU level is not included in the UK draft regulation, which could create confusion and ambiguity.
It is also vital that the EU safeguard covering freedom of expression is unambiguously included in the UK regulations to ensure that there is clear guidance for journalists and judges when interpreting and applying the directive. In the UK there is no public interest defence for journalists when publishing leaked information, and the Trade Secrets Regulation should explicitly offer protections for journalists who disclose commercial information in the public interest.
There are other concerns too. The directive may inadvertently lead to public authorities being more cautious when answering freedom of information requests and releasing information provided to them by companies, for fear of provoking costly legal action. Additionally, the UK government proposes to give corporations six years (five years in Scotland) to bring a claim against someone accused of disclosing a trade secret. This is the maximum allowed in the EU rules and is totally excessive. Finally, transposition should also include strong language penalising abusive litigation on trade secrets by corporations trying to prevent legitimate scrutiny of their activities. Regrettably the UK government’s consultation does not make any such proposals.
Everyone concerned about corporate transparency and accountability should be concerned by the risks posed by this little-known EU law and the UK government’s corporate-friendly draft regulation. In Brussels, the Trade Secrets Directive was heavily influenced by corporate interests and only strong, last-minute campaigning managed to control the damage. We should make sure that what was preserved in Brussels is not destroyed in London.
Vicky Cann is a campaigner with Corporate Europe Observatory