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JOINT COMMITTEE ON FINANCE, PUBLIC EXPENDITURE AND REFORM díospóireacht -
Wednesday, 18 Apr 2012

Protected Disclosures in the Public Interest Bill 2012: Discussion

The next item is the general scheme of the protected disclosures in the public interest Bill 2012. I thank the Minister and his Department for forwarding a comprehensive briefing note on the proposed legislation. Analysing legislation at a pre-publication stage is an important and welcome development. This committee is determined to engage and contribute to the maximum extent possible in this process both now and in the future.

I advise witnesses that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of the evidence they give to the joint committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are only entitled to qualified privilege thereafter in respect of their evidence. They are directed that only evidence connected to the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they do not criticise or make charges against a person, persons or an entity, by name or in such a way as to make him, her or it identifiable.

Members and witnesses are requested to ensure their mobile phones are turned off because they interfere with the broadcast signal. Members are reminded of the long-standing ruling of the Chair that they should not comment on, criticise or make charges against a person outside the Houses or an official, by name or in such a way as to make him or her identifiable.

I invite the Minister to proceed.

As I am the only witness here and I have absolute privilege, even if the Chair stops me, I will retain my absolute privilege. However, I will do exactly as he instructs.

I thank the Chair and members of the committee for providing me with this opportunity to present the Government's proposals on whistleblower protection legislation. In addition to hearing the views of the committee on the general scheme or draft heads of the protected disclosure in the public interest Bill, I hope to be able to provide any additional information which members might require and answer their questions on these important legislative proposals. I look forward in due course to receiving the committee's formal views on the scope and design of the whistleblower protection regime which is being developed.

As members will be aware the programme for Government contains a commitment to introduce whistleblower legislation. Following Government approval, the general scheme of a Bill was published at the end of February last with a view to informing public debate on the measures and to give interested parties the opportunity to provide their input and observations on the proposed approach.

In that context, officials in my Department have already consulted with the Irish Congress of Trade Unions and Transparency International. I am pleased that the initial feedback received on the legislative proposals has generally been positive. It is also important to stress that these proposals meet the recommendation included in the recent report of the Mahon tribunal to introduce a cross-sectoral whistleblower protection Act in place of the existing sectoral approach to whistleblowing protection. According to the tribunal this fragmented approach has led to a complex and opaque system for protecting whistleblowers which is likely to deter at least some from reporting corruption offences.

I strongly believe it is vital that Members of the Oireachtas are provided with an opportunity to consider these proposals and outline their views and perspectives at an early stage in the legislative process. Too often in the case of important legislative initiatives the first real opportunity available for Members to contribute to the legislative process is on Second Stage subsequent to the publication of a Bill. I have an open mind on this legislation and will happily embrace any ideas that might improve it. Important steps have already been taken to promote the role of Oireachtas committees in undertaking what is termed a pre-legislative scrutiny role. This allows Oireachtas committees to consider draft legislation at an earlier stage and has resulted in a more meaningful input into law making.

Strengthening the role of the Houses of the Oireachtas in this vital respect is central to the Government's political reform agenda. While there has been some engagement by my Department with key stakeholders it is critical that Oireachtas committees are given greater opportunities to lead and drive this process, particularly in the case of important reform initiatives such as whistleblowing legislation. One of the positive results which I hope will emerge from the work under way to regulate lobbying is that discussions with key stakeholders on legislative measures will take place within a structured public process rather than behind closed doors. We will deal with the lobbying legislation separately but rather than people coming to me perhaps they should come before this committee to express and test their views in public. That should be the case generally in legislation.

A structured engagement with the Oireachtas on the legislative proposals is warranted at the earlier heads of Bill stage, particularly since whistleblowing has been described by an authoritative international expert as one of the most complex, conflict-ridden areas of public policy or legislative practice. I am confident that a review will bring significant benefits in terms of the final design and content of the legislation in delivering on Government policy objectives for safeguarding whistleblowers. It will also help ensure that we correctly strike the delicate balance in considering the seriousness of the public interest claimed to be at stake against the extent to which the would-be whistleblower's actions were reasonable in the circumstances. I am grateful to the committee for its willingness to undertake this work.

The results of a recent Eurobarometer poll remind us - if we needed reminding - of the extent to which a lack of trust in the integrity of business and politics continues to be of significant concern in Ireland, with over eight out of ten people feeling that corruption remains a major problem. The OECD, among several other authoritative international bodies, has highlighted how facilitating the reporting of misconduct by employees could substantially help organisations detect and respond swiftly to ethical or integrity violations such as fraud and corruption, and in the public sector the mismanagement and misuse of public funds.

Organisations in both the public and private sectors should therefore welcome the whistleblower who is prepared to disclose information on serious wrongdoing in a workplace as a critical element in detecting and ameliorating malfeasance. Unfortunately experience shows this is seldom the case and the act of whistleblowing usually damages the career of the whistleblower as well as the image of the organisation concerned.

The proposed protected disclosure in the public interest legislation can play an important role in encouraging the decisive shift required in the culture of organisations and the perspectives of those working in them to accept the positive contribution that whistleblowing can make to identifying and mitigating significant reputational risks to organisations. The most effective way to prevent retaliation against whistleblowers is through changes in organisational practice and culture. Employees who take the risk of disclosing information on serious wrongdoing in the workplace with the public interest as their goal, deserve strong legal protections against victimisation or reprisals for having taken that action.

The proposed legislation is intended to underpin the development of a business environment in both the public and private sectors where wrongdoing is reported and the negative and undesirable consequences for the individual who discloses such information are minimised or indeed eliminated. Commentators have rightly stressed that it is unethical for an organisation to encourage its employees to report wrongdoing if it does not also provide appropriate protection when an employee who responded to this call suffers retaliation. The proposed legislation offers accessible reporting channels to those who want to report wrongdoing. A key objective is to enable the reporting of potential wrongdoing in a manner which resolves the problem at the earliest possible stage without matters developing to the point where the question of public whistleblowing arises with all the attendant difficulties and problems that it creates.

The introduction of effective whistleblowing protections applying to all elements of the public service and private sector is an important step in facilitating the bringing of serious wrongdoing to light. It also has an important role to play in helping to rebuild Ireland's international reputation following major systemic failures in corporate governance and institutional performance which have been widely documented. The proposed legislation is aligned with best practice internationally, constituting a dedicated, comprehensive and standalone legislative framework in terms of consistency of approach, legal clarity and certainty, and heightened visibility. At the corporate and organisational level, the proposed whistleblowing legislation provides the opportunity for all relevant bodies to assess the extent to which their systems, processes and culture support the business conduct and outcomes that would stand up to external scrutiny in future circumstances, and that strong legal protections are available to employees who draw attention to wrongdoing and misconduct.

The draft heads of the protected disclosures in the public interest Bill 2012 provide for an overarching legislative framework for good faith reporting and protected disclosure on a uniform basis for all sectors of the economy covering the public and private sectors. This includes the Garda Síochána and the Defence Forces, subject to specific provisions aligning the making of protected disclosures with safeguarding sensitive or secret information relating to security, intelligence and defence matters and maintaining the integrity of criminal investigations. The primary elements of the proposed legislative proposals include: extensive coverage of persons in the workplace environment; coverage of a broad scope of wrongdoing; and provision of a number of disclosure channels through which, subject to what is intended to be a stepped disclosure regime, the disclosure of information regarding potential wrongdoing can be communicated to an appropriate authority for investigation. It also details the protections which a whistleblower can avail of in the case of having made a protected disclosure and the proposed mechanisms for redress.

A detailed presentation has been circulated to members of the committee outlining the key points and key features of the scheme.

The introduction of whistleblowers legislation in Ireland represents a further significant step forward in the delivery of the Government's reform agenda. It underscores the Government's commitment to restoring fully Ireland's international reputation and significantly enhancing corporate governance and standards of accountability. It presents organisations with a significant external legal benchmark against which they can measure and assess key conduct and behaviours that lead to long-term organisational and business stability and sustainability.

I welcome that the Minister is introducing this legislation and I know he has had a keen personal interest in the topic over a number of years. It is good that he has the opportunity to deal with it now. I welcome the general thrust of the Bill and have a few questions. The Bill deals with the private as well as the public sectors. Some people might have been concerned that it might have only dealt with the public sector. It is important that there be a level playing field for all employees regardless of their employer.

The Minister referred to this representing best international practice. Does this level of whistleblower legislation exist in other EU countries or is it more restrictive or open? What is the view of IDA Ireland on these matters? Companies we are trying to attract to locate here, which are not familiar with this legislation, could be very concerned that they are coming into a country where there is provision for employees or sub-contractors on their sites to make genuinely well-founded but erroneous claims, which might militate against them coming here. I would welcome the views of those trying to attract business to Ireland. At the same time, the same rules need to apply as apply to Irish private and public sector companies.

I ask the Minister to talk about a "genuine error". People in big organisations may believe in good faith in what they are saying. In the previous debate here the Minister mentioned the word "hierarchy" on many occasions. It is inevitable that someone who is not high up in the hierarchy of an organisation would not be aware of other issues or compensating factors that might mitigate the perceived wrongdoing of which a person is aware in a particular level in an organisation. There may be other factors higher up in the hierarchy ensuring they never came to pass. What happens when it is a genuine error?

The Minister also mentioned there may be immunity from prosecution, an issue with which I always have a problem. If two people are involved in a court case and one has immunity from prosecution, that person can say and do what he or she likes and the other person cannot do the same. That is not equality of treatment and it opens up tremendous conflict as to who decides. Will the DPP need to decide on a case-by-case basis? While that normally happens in tribunals, it can happen in criminal cases also. However they need to be very advanced in the process before getting to this immunity. The Minister also mentioned the issue of retrospection. I am not aware of too much legislation that has been introduced with retrospective effect. I ask the Minister to talk about events that might have occurred prior to the enactment of this legislation but could be encompassed by it.

Overall I welcome the Bill. Most of the examples the Minister has given relate to the public sector - local authority or HSE workers. As the discussion continues I would like to see more detail of the protections of people in the private sector and more practical examples as to how this will work in the private sector.

I thank the Deputy for the welcome he has given the Bill. He has got to the heart many of the big issues with which we have been grappling. The first issue related to the pan-sectoral approach which is contrary to the view taken up to now. I have always believed we needed a simple, understandable pan-sectoral approach so that the same rules apply to people regardless of whether they work in the public or private sector. The only tweaking will be on the security side and if the Deputy wishes we can go through that in some detail shortly. I will consider the approach taken internationally. In the UK in 1998 and in New Zealand in 2000, statutes were enacted applying widely across the public and private sectors prohibiting the employer from retaliating against employees disclosing information about wrongdoing. The gold standard we considered is the model in UK and that country was the ground breaker. The New Zealanders learned from that and introduced a refined and better model in 2000. Even since then there has been case law from which we have learned. We believe that when this is enacted, Ireland will represent the gold standard - that is our objective. The Deputy asked about the EU and other countries. The G20 has asked for that model to be replicated and at the Seoul summit in 2010 the G20 leaders recognised that the issue of whistleblowing was a key element in fighting corruption generally.

The Deputy asked about the view of IDA Ireland. In formulating this proposal I have had close contact with all Departments, not least the Department of Jobs, Enterprise and Innovation and they fully support it. They believe this will enhance Ireland's reputation and be a draw for inward investment rather than the reverse.

The issue of good faith is critical and I would be interested in hearing the views of members as I have no clear view on it myself. The honest belief is important but motivation is a different kettle of fish. For instance in the case of Mr. James Gogarty - I probably should not be case specific - would one say his motivation was good-faith motivation? However his information was important and led to very significant facts being disclosed. This is a matter we may need to tease out. It is important that the person honestly believes the information imparted is true. However, I am not clear in my mind about the motivation. I put the notion of good faith reporting into the legislation. If someone knows where the bodies are buried - to use that phrase - but his or her motivation to disclose the information might not be the best perhaps as a result of having been overlooked for promotion, does that diminish the value of the information? I would be interested to get the views of members on that matter.

The Deputy also spoke about immunity. Immunity is to ensure that people who whistleblow are protected from legal sanction as well as administrative sanction in the workplace. While we can tease out the detail of that, I believe we need that level of immunity.

Regarding retrospection, in the UK someone is covered who was a whistleblower before the enactment but the victimisation arose after the enactment. That is the model we are trying to replicate here.

I am sure Deputy Fleming reflects the general view of the committee that the heads of the Bill are extremely welcome. I am also sure the committee will be happy to engage on the proposals and take the Minister up on what he has said about giving input even before the Bill is published and certainly before Second Stage is reached.

There is not much point in analysing the heads of a Bill in the same way as one would analyse the text of legislation. An important aspect is one the Minister identified, which is the change of culture in organisations, both public and private. The hope is that this will encourage the introduction of internal mechanisms in employment environments where perhaps a code of practice would be put in place. Certainly employees ought to be made aware in advance that a particular set of procedures is in place and protection exists for them.

I think I am clear on the answer to a particular key issue but I would like full clarification from the Minister. Protection of a whistleblower is not based on a necessity for the information he or she communicates to be true ultimately. This is why the test of good faith exists. It is a belief in the substantial truth of a piece of information. Of course it could turn out to be entirely erroneous - one hopes this would not happen - but if such a person acted in good faith or in the reasonable belief it was true he or she would nevertheless be protected. It is extremely important that this is so.

The questions of good faith and reasonable belief are always difficult issues conceptually. How does one test reasonable belief? It can be done only through an objective test and asking whether it was reasonable for the person to believe it. If somebody states he or she believed it to be true it is an assertion of belief by an individual, but it must be tested in some way if a dispute arises. The only way this can be resolved is to apply an objective test and ask whether it was reasonable for the person to believe it. This brings us to a range of areas in terms of applying such a test.

I do not want to make too much of this because we are dealing with the heads of the Bill but I draw the Minister's attention to heads Nos. 5 and 6. If one discloses to an employer one must have a reasonable belief that the allegation is true and the disclosure is made in good faith. However, if the disclosure is made to a relevant body included in the list provided, a higher burden is placed on one. Two different words are used with regard to this, namely, "allegation" and "disclosure". I do not know why this is, perhaps it is something small. A person reporting to a relevant body must reasonably believe the disclosure to be substantially true. I do not want to nitpick but "substantially true" does not necessarily mean "true". If something is fully true one tends to say it is true. By "substantially true" one usually means it is not entirely true but it is more or less true. It looks counter-intuitive and looks like a lesser burden is placed when reporting to an outside body because it requires belief that something is substantially true whereas we require somebody reporting internally to believe it is true. We need to examine these distinctions.

Deputy Fleming spoke about a person making a mistake. We want to protect the whistleblower but we must also protect against rare enough but possible abuse of the legislation. One has immunity against civil action which I presume includes immunity against being sued for defamation. If an allegation is made that a financial officer in a company did something improper the person making the allegation will be protected, but if such a serious allegation turns out not to be true, where does this leave the person against whom the wrong allegation was made? Such a person could well be affected in his or her professional standing if a suggestion was made that an accountant or financial officer did something wrong. We need to address the issue of civil liability. We want to give rights and protections to whistleblowers but we must be careful the pendulum does not swing so far as to cut out the possibility of somebody through no fault of his or her own being drawn into something that ends up being untrue.

I wish to raise another point on these drafting issues. The provisions against penalisation are not all that different from the provisions we are already familiar with in employment law whereby an employer cannot penalise somebody for having made a complaint. We must be careful because it is open to abuse. I am not saying it would be abused but we want to get this legislation absolutely right. We want to protect whistleblowers but we do not want the thing to run too much in the other direction. An employer may have taken action against an employee which the employer thinks is justified but the employee decides to make a complaint or report something which he or she reasonably believes to be true and therefore the employee cannot be touched. We need to have protection against such types of abuse. I do not state they would be common but they could happen.

The Chairman is using his legal focus to good effect because these are the issues we have been discussing. It was not for nothing that I quoted the description of this area of legislation as one of the most complex conflict-ridden areas of public policy or legislative practice because we are striking balances. We do not want to have a charter to enable people to destroy other people's character but at the same time we want to overcome what unfortunately seems to be endemic in certain strands of Irish public and private sector life where wrongdoing was routinely covered up and nobody reached out. Getting this balance right has taken a great deal of crafting to date. On the basis one does not reinvent the wheel we have looked at where it is in operation. As I have already stated the gold standard was originally the United Kingdom and has migrated to New Zealand. These jurisdictions have a great deal of experience and it might be worth the committee's while to bring before it the New Zealand ambassador or somebody from New Zealand or the UK with experience of this type of legislation to go through the pitfalls that have been seen. We have had such interaction with them.

The Chairman made a point on cultural change and this is extremely important. The object of much legislation is not to have a legal forcing of actions but to change the culture so that all companies will as a matter of form have their own codes of conduct, so as a matter of routine when people see wrongdoing they will have a procedure to report it and the notion of victimisation will not arise. We must migrate to this culture, and to help this the legislation will require all State agencies to draft a code of conduct and all Departments and State agencies will do so. We have had discussions with the Labour Relations Commission on a code of conduct for the private sector on a cross-sectoral basis also so there will be commonality in it. People will know where they can go and they know the consequences of it.

The entire regime is graduated so the threshold of disclosure slightly increases as one reaches up. The idea is that when it beds down, as it has elsewhere, there will be a channel at employment level where one can disclose wrongdoing with reasonable assurance that it will be acted upon and remedied and it will be the end of the matter. There is a reasonable level of honest belief with regard to this. If one goes beyond the company to report to the next level, which is regulator level, one must have a slightly stronger belief that the matter is substantially true. We can tease out how this would be done. One would be going beyond the company and alerting somebody external and this should not be done without some thought. I am willing to hear the Chairman's views and I understand his views on how "honest belief" as opposed to "substantially true" will be measured. I very much agree with him that in ensuring wrongdoing is outed and that people are comfortable and not victimised for whistleblowing, we do not have vexatious or malicious people or people who are just not right. There are people who perceive wrongdoing all over the shop. All of us in our clinics come across people who just believe that everybody is corrupt and doing them down. There cannot be a charter for them to assassinate people's good names or characters. We will try to get these factors right. The committee's opinions on this matter will be helpful.

This is an interesting debate. When introducing something new like this, there is always a danger of building something in theory instead of seeing what in practice has led to us addressing this problem. The culture that the Minister mentioned developed in the past 15 or 20 years and permeates the whole of society philosophically, as even Fintan O'Toole and others have commented.

It must be true, so.

No, let us take this seriously.

I was deadly serious.

Take the DCC-Fyffes insider trading case, the AIB DIRT scandal, NIB medical insurance policies, some of Bank of Ireland's activities and Anglo Irish Bank's behaviour as examples. In Professor Honohan's report, he stated that it would have taken a courageous person to bring into discussion some of the operational matters in the Central Bank. There was no wrongdoing, as wrongdoing is difficult to define. One either breaks the law or one does not. Wrongdoing can be an operationally substandard approach to work. How does one measure that? It can lead to significant problems.

Someone at middle management level might be dissatisfied that, for example, the principles of banking as expressed on balance sheets are being deviated from or are not apparent in a balance sheet financial structure, but Ireland has no prescriptive French-type or Continental-type law that sets out which box has not been ticked or which measurement has not been achieved. I might be losing my audience.

We live under the common law culture, which is driven to a large degree by precedent. Precedent is fact and history. Instead of using the template of the UK model, as amended by New Zealand, we should examine where the problems lie and who the main actors are. Consider Mr. McErlean of the AIB Group and those people involved in other cases.

Decisions in the courts have been turned upside-down. For example, in the longest running case in Irish corporate history, the High Court's decision was turned upside down by a unanimous decision of the Supreme Court. Mr. Justice Fennelly explained that insider trading was "a fraud on the market." That decision was reached at the end of a long process with considerable costs and during which all sorts of people presented all types and levels of evidence, which was interpreted through many different somersaults and acrobatic understandings. It eventually came down to one sentence, which conveyed the unanimous agreement that there was insider trading, which was a fraud on the market.

If we examine the facts behind such cases, we can try to put together a framework to encourage people who have reasonable grounds, supported by evidence, to make cases to their internal managements or boards, to an ombudsman or whatever so that we can prevent that type of group-think behaviour. Establishment group-think in Ireland was so pervasive that it led to problems.

Regarding the question of how to proceed with whistleblower legislation in respect of financial institutions, ownership needs to be taken by the hierarchy, as the Minister called it. A lower level employee might find a problem and report it to someone in the hierarchy as per the company's internal procedures. If the person to whom that employee reported the issue does not see it to an end, not only should he or she be reprimanded within the organisation, but that person should also be unemployable in institutions licensed by the State. The same could apply in Departments and the wider Civil Service. If someone is found to have acted in a negligent way with grave consequences for the people of Ireland, he or she should no longer be employable by the State. There must be an element of pushing an issue up to the hierarchy, which would be responsible for following through on it.

Dr. Eddie Molloy has an article on this matter in today's edition of The Irish Times.

Deputy Mathews gave a large overarching presentation. We will not be able to solve all of our problems through legislation. No matter how well crafted it is, it will not cover every eventuality. In the heads as published, nine categories are encompassed by this legislation. They are comprehensive and will encompass the issues raised by the Deputy. The Bill fully meets the compendium of best practice and guiding principles for legislation on the protection of whistleblowers drawn up by the G20. This Bill is not simply the product of my Department. It considers the international context to determine which is the best way to go. In terms of the G20 aspirations being pushed on countries, no one has yet crafted as advanced a Bill as this. Most of its elements replicate what has been established in the United Kingdom and New Zealand, but it will be even more nuanced and, after the committee and Oireachtas have concluded their work on it, better.

Deputy Spring's point relates to the issue of changing cultures. Two questions must be posed. Unless cultural change is embraced, the approach taken will be legalistic, in that people will argue against the protection of whistleblowers as opposed to the reverse. Under the legislation, the onus of proving that an action was in bad faith will fall on the employer as opposed to vice versa. We should migrate away from that situation over time, as will happen. People will assume that it should be a normal, healthy part of any company or State agency to discuss something they believe is not right with someone else to have it put right without further ado.

A point was raised about consequences for those who resist. We will need to tease out this matter, which relates to a wider question on which Deputy Mathews touched when he referenced an article in one of today's national newspapers, that is, fundamentally altering the structure of the public service. This is a job of work upon which we have embarked. I do not know whether the committee has had a chance to read the programme for Government in that instance, but it is ambitious in terms of changing the public service's structure. However, this matter is wider than the public service and we must ensure that there are consequences for people who damage the reputation of companies, who withhold or prevent the proper functioning of the common good or best or good practice or who aid and abet wrongdoing or criminality in any way through their silence. We must tease out these issues.

I thank the Minister and his officials for attending and for giving the committee a briefing. I propose to list this matter for the joint committee's next meeting, at which we can consider how best to proceed. The Minister's deadline is June.

I would like the committee's deliberations by then. My objective is to publish the Bill during the summer.

We will determine how best to contribute. We will discuss the matter at our next meeting. There being no other business, the meeting is adjourned.

The joint committee adjourned at 6.20 p.m. until 2 p.m. on Thursday, 26 April 2012.
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