The deadline for the implementation of the Whistleblower Directive[1] (December 17^th, 2021) is drawing closer. More and more questions arise for companies and EU member states trying to establish (cost) effective internal and external reporting systems. The EU Commission released recently two statements explaining in detail why local reporting systems on legal-entity-level are absolutely necessary and cannot be replaced by centralized and/or regionally based reporting and investigation systems.

Based on such imperative interpretation each company with more than 49 employees has to offer possible whistleblowers an accessible local reporting system based on the national implementation rules. The disadvantages of such local systems are obvious (high personnel and organizational costs); time will show if the advantage underlined by the EU-Commission (proximity to the whistleblowers) will actually matter in practice. One cannot exclude that exactly this proximity will discourage disclosures, since it allows an easier identification of the whistleblower.

Middle-sized companies apply simplifications

Middle-sized companies (defined as companies with 49–250 employees) may combine a local with a centralized reporting system while clearly offering the whistleblower the possibility to choose between such options. The challenge will be to design a targeted company policy which determines a tendency to choose the centralized system.

An easier procedure is also provided for groups, where larger parent companies may help their subsidiaries by receiving reports and, sometimes, even conducting investigations. The follow up and the sanctioning has to occur, however, on the local level.

Such facilitation cannot be used by larger subsidiaries (more than 250 employees), which must establish completely functioning systems on local entity-level and cannot rely on centralized systems.

Conclusion

Following the unexpected position of the EU-Commission company groups need to rethink their compliance systems. Romanian companies are hoping for clarifications about the combination of central and local systems within the Romanian national regulation to come.

The scope is to find a balance between the protection (on one hand) and the motivation (on the other hand) of the whistleblowers. The practice will show if outsourcing such channels to third parties will in fact decrease the personnel and bureaucratic expenses and offer an objective solution whistleblower will trust to use.

Please find more detailed information under: https://stalfort.ro/wp-content/uploads/2021/10/20210923_RO_Obligation-to-protect-whistleblowers-are-reporting-systems-on-group-level-allowed.pdf

[1] Directive (EU) 2019/1937 of the European Parliament and of the Council of 23 October 2019 on the protection of persons who report breaches of Union law.