The Role of Whistleblowing Legislation in the Regulatory Governance of Markets and in National Security

The gradual introduction of whistleblowing protection in the fields of financial and corporate regulation in the US and the EU is contrasted by a lack of provisions and a prosecutorial approach for whistleblowers in national security. The hypothesis of a dualism in the legal reception of the phenomenon of whistleblowing structures the fundamental research question of my doctoral research, which is how the role of whistleblowing in contemporary society can be conceptualized from a legal perspective. Is whistleblowing a human right, an aspect of freedom of expression? Or is whistleblowing an instrument of regulation? A major conclusion that I drew from the comparative legal framework of whistleblowing protection in the US and the EU is that whistleblowing is institutionalized primarily as a regulatory instrument, rather than as an extension of labour or civil rights. In the US, the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act of 2010 established a paradigm whereby the whistleblowers’ protection from retaliation is subsumed under the broader goal of detecting and remedying systemic threats to market integrity. This meant an absolute emphasis on the procurement of information for cases of securities law violations or fraud against shareholders, as well as the lack of subjective requirements, such as good faith, for the whistleblowers. While the Sarbanes-Oxley act prioritized internal reporting mechanisms within the corporation, the Dodd-Frank Act followed a model of reporting wrongdoing directly to the regulatory agency, coupled with hefty monetary rewards for valuable information. The oscillation between less or more interfering policies highlights the dependence of whistleblowing protection mechanisms on the political economy and the level of trust placed on financial self-regulation. The European model of whistleblowing protection showcases important signs of convergence with the US. The first pan-European framework for whistleblowing protection came also in the field of market abuse. The Directive 2015/2392 established procedures for reporting of infringements of the Market Abuse Regulation to the competent authorities set up by each Member State, encouraging thus external whistleblowing, just like the Dodd-Frank Act. This constitutes a noteworthy deviation from the variations of the ‘three-tiered system’ of EU Members States. It also highlights that it is efficiency that has been the driving force behind this reform, in abstraction of the different legal cultures of EU Member States. The goal of enhancing enforcement is also the centripetal force of the newly published proposal for a Directive strengthening the protection of whistleblowers reporting on breaches of EU law (April 2018), which targeted the areas of public procurement and financial services. Whistleblowing protection may, according to the proposal, contribute to a well-functioning single market, by securing the financial interests of the Union, and by ensuring the respect of competition rules and of a level-playing field for private actors. In general, the approach that has been adopted both in the US and in the EU links whistleblowing protection with its function as a guarantee for market integrity. Its institutionalization constitutes a form of regulatory pluralism, reflecting a way of governing ‘at-a-distance’ over a privatized network of services. Whistleblowers are protected as carriers of information that is valuable for some specific policy purposes; when the information does not pertain to these designated purposes, protection ceases as well. This functional, instrumental approach to whistleblowing protection is mirrored in the domain of national security a contrario, this time through the absence of protection. Both in the US and in the Member States of the EU reporting mechanisms for internal whistleblowing are very restrictive or inexistent. At the same time, individuals who make public disclosures are threatened with administrative or even criminal sanctions. That prompted the normative question of my research, that is, how to balance whistleblowing with national security interests. In general, I argue against the idea that national security, because of its sensitive nature, may be conceived as a space potentially ‘beyond-the-law’, where the executive can make evaluations and decisions based on self-developed criteria that do not have at least indirect democratic validation. I see national security as a system of organizations and institutions subject to possible failure like all others. Therefore, I suggest that whistleblowing can have a role as an accountability mechanism, contributing to the maintenance of the legitimate character of state secrecy. Concretely, a system of legitimate secrecy should entail the prevention of overclassification, the establishment of systems of internal and external reporting of wrongdoing, involving inter-agency and inter-branch coordination, and some level of protection for individuals that make public disclosures. As far as public disclosures are concerned, a comparative examination of the jurisprudence and the case law in the United States and in the ECtHR indicates that whistleblowing in government is conceptualized as a conflict between subjective rights and public interest. I propose an institutional framing of the conflict instead. That means shifting from the extent of the freedom of speech and the good faith of the whistleblower, to the legitimacy of secrecy as a criterion for protection. I argue that the ultimate value to be protected in cases of unauthorized disclosures of classified information is not the self-fulfilment of the employee, but rather the democratic control over security politics, as well as an institutional system of rule of law, separation of powers/checks and balances, and political liberalism. Where state secrecy covers violations of rights, misconduct, or by-passing of the law, then whistleblowers should be entitled to some protection based on the social value of their disclosures. The axes of the institutional model are a) to protect whistleblowing from criminal sanctions when it reveals illegitimate secrecy, in order to restore accountability of the executive, and b) to protect, on the other hand, legitimate secrecy through primarily administrative sanctions to individuals making the disclosure. The current institutionalization of whistleblowing denotes a functional approach that extends only to market-related interests. Trying to look beyond an approach oriented towards economic efficiency, I suggest that an alternative normative substratum of whistleblowing protection could be, rather than the subjective rights of the whistleblower, the institutionalization of a form of democratic control within social systems. Whistleblowing should function as a counter-institution against the expansive tendencies of social systems –whether that is the economy or national security

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