Trade Secrets Directive: Corporate secrecy amid calls for transparency

21st November 2016

George Orwell once wrote; ‘In times of universal deceit, telling the truth is a revolutionary act.’ In the past week these words certainly rang true with the revelations contained in the Panama Papers. From global protests, to a political resignation and promises of greater transparency in relation to corporate tax affairs – the impact of the leak has been considerable.

As embarrassed politicians do their best to allay our fears, tomorrow MEPs will vote on whether to adopt the EU Trade Secrets Directive that seeks to harmonise trade secrets laws across the Member States. The underlying principle is to allow companies to protect their business information and know-how from their competitors. However, the new Directive prioritises the rights of corporations over individuals’ rights to freedom of information and expression. Under the Directive, corporations will be able to issue legal proceedings against anyone; citizens, journalists and potentially whistleblowers - who in the process of revealing public interest information reveal a trade secret. The definition of a trade secret is deliberately broad, and includes any kind of information that a company wants to keep secret, the burden is on the individual to show otherwise.

The Directive risks undermining whistleblower protection in Member States with whistleblowing laws in place as the threat of a law suit diminishes the sense that such laws can protect workers who expose malpractice. Whistleblowers in Member States without this protection are in an even more precarious position – similarly exposed to the risk of being sued by their employer, they also risk losing their jobs without any legal recourse. This fear may cause a whistleblower to delay – allowing malpractice to continue - or worse, stay silent.

In the past whistleblowers have played a part in revealing everything from the Volkswagen emissions scandal to secret tax deals, like in the case of Luxleaks. Under the new Directive, both disclosures could arguably be defined as trade secrets. Without sufficient safeguards, future scandals that involve commercially sensitive information may never come to light. We highlighted the importance of including a public interest defence for whistleblowers in the Directive - but thus far our concerns have not been heeded. To this end, PCaW and a pan-European coalition of NGOs and activists are calling on MEPs to vote against the bill tomorrow.
This Directive forms part of a wider legislative landscape that seeks to give companies more rights. This week the US Senate adopted an equivalent law on trade secrets, which has yet to be approved by the House of Representatives. If passed, the European Trade Secrets Directive will form part of the text of the controversial Transatlantic Trade and Investment Partnership.

Excessive secrecy facilitates the perpetuation of wrongdoing in any context. Throughout history we have seen how cultures develop behind closed doors when there are no transparency mechanisms to the powerful to account. The Trade Secrets Directive does little to promote the corporate transparency EU regulators are calling for. The Directive, in its current form, creates excessive secrecy and must be rejected.