Europe’s top human rights court has rejected an appeal brought by a whistleblower who was fined by a Luxembourg court for revelations that helped expose industrial-scale tax dodging.
The European Court of Human Rights on Tuesday ruled that Luxembourg’s conviction of former PwC employee, Raphaël Halet, did not violate his right to freedom of expression. Two dissenting judges warned, however, that the ruling’s support for the Grand Duchy and for accounting giant PwC will deter future disclosures of valuable information.
In 2016, Halet was found guilty of theft and violating Luxembourg’s secrecy laws after he downloaded tax records from a work computer that showed how companies like Apple, Amazon and Ikea avoided taxes by shunting profits through the tiny nation.
Halet and another whistleblower, Antoine Deltour, shared PwC documents with investigative journalist Edouard Perrin, who published an investigation in 2012 before going on to collaborate with the International Consortium of Investigative Journalists in the 2014 Lux Leaks investigation. ICIJ and reporters worldwide pored over the documents to reveal how nearly 340 global firms slashed their tax bills by making confidential deals with the Luxembourg government.
In response, European governments promised to end the culture of secrecy that allowed some of the world’s largest companies to pay less than 1% tax. Luxembourg, for its part, threatened Halet and Deltour with 18 months in jail. Deltour was ultimately acquitted and Halet was fined $1,200.
In 2018, Halet appealed to the European Court of Human Rights, arguing that the fine violated his right to free expression.
In its decision this week, the court ruled that Luxembourg’s treatment of Halet “struck a fair balance” between protecting his freedom of expression and the rights of PwC, the $43 billion accounting and advisory giant with a track record working for kleptocrats and enabling financial crime. PwC had suffered “a difficult year” after the Lux Leaks investigations, the court noted, albeit fleeting: one year later, PwC rebounded by increasing revenue and hiring more employees.
Five of the court’s seven judges ruled that Halet’s disclosures, smaller in scale than those obtained by Deltour, were not novel enough to outweigh the damage to PwC’s reputation.
In other words, the court ruled, Halet revealed what everyone already knew: companies dodge taxes and firms like PwC help them do it.
Two judges in Strasbourg disagreed, writing in a dissent that the majority ruling created an impossibly high bar for future whistleblowers to meet. Dismissing Halet’s claim because he leaked a smaller, less explosive set of documents to journalists sets a dangerous precedent, the two judges said.
Corporate tax avoidance will not stop after one leak or one investigation, Judges Paul Lemmens and Darian Pavli warned. “In some cases, it takes decades of argumentation and counter-argumentation before public or private behavior really changes,” the judges wrote in their dissent, which was published in French.
The judges compared the value of repeated leaks and exposés into corporate tax dodging to videos that capture police brutality on screen. “One may, for example, be fully aware of the problem of police violence, but the impact of a specific episode of excessive force that has been videotaped can nonetheless be very profound.”
The court’s decision “is likely to have a significant deterrent effect on future whistleblowers in the private sector, because a person who is considering disclosing information that he believes corresponds to the public interest may face great uncertainty in determining whether this information will be considered to meet the much higher standard,” Lemmens and Pavli said. “In our respectful view, this hinders the effective protection of whistleblowers in the private sector.”
Mark Worth, executive director of Berlin-based nonprofit, Whistleblowing International, told ICIJ that the “ruling is a major step backward.”
“The court has put the concerns of private companies over the public interest. Imagine that a witness will have to weigh how their disclosure could harm a perpetrator of a crime. If this is the standard that the court is setting, then why would anyone report a crime? This is not how law enforcement works, and not how the justice system works.”
The ruling against Halet comes in the same week that the European Commission suffered a setback in its campaign to force Amazon to repay about $300 million in taxes to Luxembourg. The European Union’s competition chief Margrethe Vestager had accused Luxembourg of giving Amazon an illegal sweetheart deal on its taxes, and ordered the Duchy reclaim 250 million euros in back-taxes from Amazon. Both Amazon and Luxembourg appealed against the order, and on Wednesday, the EU General Court ruled in their favor, denying that the tax agreement gave Amazon “selective advantage” over others.
Vestager has not ruled out appealing the EU General Court’s decision in the European Court of Justice, according to The Telegraph.
“We will carefully study the judgement and reflect on possible next steps,” she said.
Update: An earlier version of this story erroneously said “EU court” instead of “European court” in the headline. Comment from Mark Worth of Whistleblowing International was added to the piece after initial publication.