BREAKING: Safe passage through Panama - EU Trade Secrets Directive approved, but not without protest

The AmeriKat enjoys her secrecy, but will the
passing of the EU Trade Secrets Directive
change anything?  

Following close on the heels of the US Senate's unanimous approval of the Defend Trade Secrets Act (see Kat post here), the European Parliament has, in the last few hours, voted in favor of the EU Trade Secrets Directive.  In the latest in his series of Kat posts on the Directive (see here), Mark Ridgway (A&O) explains what today's vote means:

"Timing is everything.  And in the end it could have been better for the EU Trade Secrets Directive.  A mere 10 days after the Panama Papers story broke, and not so very long after Dieselgate, the European Parliament vote had some danger of being derailed by those who see the Directive as a major threat to transparency and press freedom. This view was put most strongly by the The Ecologist, opining on the eve of the vote that:

"…under [the Directive’s] Draconian provisions, punitive lawsuits, jail sentences and €350,000 fines await journalists, campaigners and whistle-blowers. The European Parliament must reject this wicked law tomorrow!"

Today’s vote was also preceded, late yesterday evening, by a robust plenary session of the European Parliament, with MEP Constance Le Grip (the main Rapporteur for the directive) reporting on December’s “trilogue” agreement (see Katpost here).

After many months’ of hard work by herself and the JURI (Legal Affairs) committee, Mdm Le Grip commended the Directive to the European Parliament, explaining that, after some “fairly serious confrontation” during the trilogue, what had been arrived at was "...a balanced text; it protects what is essential to our companies, their savoir faire, their intangible wealth and knowledge, but at the same time we have safeguarded journalists and whistleblowers."

The arguments in favour of the Directive were also well put by, amongst others, Commissioner Johannes Hahn, explaining that: 

"This is an important step forward in allowing our creators and innovators to get profit from their hard work and intellectual capital … Let me be clear, this directive is not about promoting secrecy in business, it is about trust. Thousands of EU companies, most of them SMEs, are innovating out there, sharing confidential information. The new EU rules will contribute to building such trust, as they will ensure that the risk of sharing such information diminishes"

The debate was however by no means one-sided, with the adverse argument focussing on the inter-related issues of whistleblowing and press freedom, with the Panama Papers revelations providing a handy, high-profile example. These concerns were also raised despite the clear statement in Article 4 of the Directive that:

"Member States shall ensure that the application for the measures, procedures and remedies provided for in this Directive is dismissed when the alleged acquisition, use or disclosure of the trade secret was carried out in any of the following cases: 

(a) for exercising the right to freedom of expression and information as set out in the Charter of Fundamental Rights of the European Union, including respect for freedom and pluralism of the media;

(b) for revealing a misconduct, wrongdoing or illegal activity, provided that the respondent acted for the purpose of protecting the general public interest…"

Recital 12a also supports this, explaining that: 

“…the protection of trade secrets should not extend to cases in which disclosure of a trade secret serves the public interest, insofar as directly relevant misconduct, wrongdoing or illegal activity is revealed. This latter should not be seen as preventing the competent judicial authorities from allowing an exception to the application of measures, procedures and remedies where the respondent had all the reasons to believe in good faith that his conduct met the appropriate criteria set out in this Directive.”

The concern expressed, however, is that the Directive would apply (and therefore remedies for unlawful disclosure would be available) in cases where disclosures were made in good faith but where the entirety of the disclosure does not reveal wrongdoing or illegality (i.e., where some “innocent” confidential material is caught up in the disclosure). It was also commented (by MEP Philippe Lambert) that it would be 

"a wrong signal…to adopt, 10 days after the Panama Papers, a text which will make it more difficult for whistleblowers, because the burden of proof will be on the whistleblower and not on the companies."

Several MEPs therefore urged postponement of the vote, until such time as specific legislation has been brought forward by the Commission to protect whisteblowers.

In the end, the voices in favour prevailed, with 503 votes for and only 131 against. The strength of this majority is also fair reflection of the concerns, which were at times overstated. For a start, contrary to the suggestion from the Ecologist, the Directive has no impact on criminal law (this remains entirely a matter for national legislators). Recital 12a also makes clear that national judicial authorities have ample scope for taking account of national sensitivities.  I suspect national approaches to whistleblowing and public interest will remain largely unchanged as a result of the Directive, although the impact of the Panama Papers is perhaps harder to predict."