How important is the new Whistleblower Protection Act to public undertakings?
Public undertakings have already been harder hit by claims for information and disclosure than private-sector companies (I.). The existing risk of an uncontrolled outflow of internal company information could now be even greater due to the German Whistleblower Protection Act (Hinweisschutzgebergesetz), due to come into force on 2 July 2023 with special features for public undertakings (II.).
I. Public undertakings have limited control over their information due to third parties’ rights to information
Public undertakings’ control over their own information is already limited by third parties’ rights to information. These rights, some of which will be considered below, are linked to special public-law obligations of public undertakings. According to the general definition of the term, public undertakings have the legal form of a legal person under private law which are majority-controlled by a public corporation or a legal person under public law (institution under public law, corporation, foundation), although the addressees of the claims to information vary depending on the specialist law concerned.
Rights to receive information from public undertakings arise first and foremost from the laws on freedom of information and transparency at federal and state level. This may be illustrated by looking, for example, at the German federal government’s Freedom of Information Act, which provides a right of access to official information. The right is directed toward the public authority that uses the undertaking to fulfil its public duties, irrespective of the ownership situation. The Federal Networks Agency (Bundesnetzagentur), for example, was obliged by the Freedom of Information Act to disclose internal company information belonging to a municipal grid operator. As a public undertaking, the operator did not have fundamental constitutional rights and, as a monopolist, could not invoke the protection of trade and business secrets provided by sub-constitutional law (Cologne Administrative Court, judgment of 25 February 2016, case 13 K 5017/13).
In addition, the Federal Environmental Information Act and the Environmental Information Acts of the federal states provide a right to free access to environmental information held by a body obliged to provide information. This may also apply to legal entities under private law, for example where they perform public tasks related to the environment and are subject to federal control. The broad expression “environmental information” includes activities with an impact on environmental elements. For example, a third party was able, based on the Federal Environmental Information Act, to successfully assert the right to information from a company which supervised nationwide funding schemes for biological safety research as a project sponsor on behalf of the federal government (Hesse Higher Administrative Court, judgment of 31 October 2013, case 6 A 1734/13.Z).
The media’s rights to information from public undertakings can also be derived from the press laws of the federal states, irrespective of the organisational structure. Last year, for example, a ruling was made that a private foundation is obliged to provide information like a public authority if it performs public tasks, uses public funds for that purpose and the public sector has a controlling influence over the foundation (Rostock Higher Regional Court, decision of 11 July 2022, case 6 U 19/22). Back in 2017, the Federal Court of Justice upheld a claim by the press to information from a public limited company providing services in the area of services of general interest and controlled by the public sector, due to suspicion of indirect campaign financing (Federal Court of Justice, judgment of 16 March 2017, case I ZR 13/16).
Public undertakings are also subject to parliamentary rights to request information and conduct questioning, which are rooted in the federal constitution and the constitutions of the federal states. In the federal constitution, for example, Article 38(1) sentence 2 is authoritative. Although the relevant government at federal or state level is obliged to provide information, the information to be provided may ultimately also be about public undertakings. Information on government action must also be disclosed if the government uses third parties to perform its functions. Only in this way can the Bundestag control the budgetary and economic management of the government, also with regard to the activities of the public sector in the context of its participation in private-sector enterprises. Thus, the federal government was obliged to provide information to complaining members of the Bundestag on financing agreements for requirement plan agreements as well as profitability calculations for the Stuttgart 21 rail project, which were available to Deutsche Bahn AG (Federal Constitutional Court, judgment of 7 November 2017, case 2 BvE 2/11). Parliamentary committees of enquiry should also be mentioned in this context. They have far-reaching rights to information and to investigate, which are comparable to the powers of a public prosecutor in criminal proceedings.
Finally, there are rights to information under budgetary law. For example, the Federal Budget Code (Bundeshaushaltsordnung) obliges the federal government to inform the Bundestag about all fundamental and essential questions concerning the federal government’s holdings in private-sector companies. Furthermore, obligations to disclose information to the Audit Offices (Rechnungshöfe) must be observed. The Federal Audit Office (Bundesrechnungshof) must be provided with documents it deems necessary for the fulfilment of its duties, and it must be provided with the information requested. It may also inspect the books and records of certain public enterprises. The Federal Audit Office not only communicates its audit results to public authorities, but may also grant third parties access to the audit result if it is final.
II. Significance of the new Whistleblower Protection Act for public undertakings’ already limited control over information
In principle, the Whistleblower Protection Act affects all undertakings equally. The newly created legal certainty for whistleblowers (see here) limits companies’ control over their own information as a whole. However, there are also special features for public undertakings. This is because certain breaches falling within the material scope of the Act can only be committed by civil servants or employees of public undertakings. These include, among others, provisions on the acceptance of advantages and bribery in the Criminal Code as well as provisions of public procurement law. In addition, the Whistleblower Protection Act breaches the civil servants’ obligation of confidentiality under civil service law. Overall, this results in a different, ultimately broader scope of application for public undertakings than for private companies.
The existing rights to information and disclosure from public undertakings could gain new relevance through the Whistleblower Protection Act. Third parties (press, members of the Bundestag, audit offices, competing private companies, private individuals) have so far sometimes simply failed to assert claims because they had no basis for doing so. The new Whistleblower Protection Act could change this. In the future, under its protection, more sensitive company information is likely to be disclosed to the public, which will then enable interested third parties to make their requests for information and disclosure in a targeted manner. This in turn could encourage company employees to report further abuses. The existing rights to information and disclosure and the new Whistleblower Protection Act could therefore interconnect and reinforce each other.
Public undertakings’ even more restricted control over information due to these new circumstances should lead to a new way of dealing with information, especially in a company crisis following a compliance violation. Since third-party access to sensitive information cannot, or can no longer, be controlled with sufficient certainty, it may be advisable (more so than at private companies) to proactively publicise compliance violations and to make transparent handling of compliance violations part of the corporate strategy.