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Lawyer | Certified criminal law specialist | Partner
‘The biggest scoundrel in the whole country is and always will be the informer’ – a widely known quote attributed to Hoffmann von Fallersleben. Accordingly, in German and, to some extent, European culture, reporting alleged violations of the law or abuses has historically been viewed negatively. The English term ‘whistleblowing’ has a somewhat more positive connotation; which is understood more as a warning than ‘snitching’ and is associated with civil courage or the courage of the whistleblower.
In view of this, it seems more than understandable that many companies have been rather critical or cautious about introducing an internal whistleblower system in the past. They saw the much-cited corporate culture as being at risk and feared a climate of mutual suspicion.
However, since the introduction of the Whistleblower Protection Act in 2023, both private sector companies and public sector organisations with 50 or more employees in Germany are now obliged to set up reporting systems that meet the standards defined by law. The same applies in all Member States of the European Union where the EU Whistleblowing Directive has now been transposed into national law. This finally gives whistleblowers a legal basis that protects them, among other things, from reprisals under labour law if they report, with good intentions, circumstances where there is suspicion of illegal behaviour relating to the company. This undoubtedly also strengthens compliance and protects companies and organisations from financial damage: when employees report suspected cases, potential legal violations are detected earlier, reducing economic damage, preventing ‘imitation’ within the organisation and ultimately averting impending sanctions and possible damage to reputation.
Practical experience to date shows that, regardless of compliance with a legal obligation, there are many other arguments in favour of maintaining a reporting system.
The biggest reservation against the introduction of a whistleblower system was and still is the concern that the system will be abused and that deserving employees will be deliberately and wrongfully accused. Experience to date clearly shows that this rarely occurs in Germany (so far). Although there have been reports expressing suspicion, these have not been confirmed after internal investigation. However, in most cases there are objective criteria that justify an initial suspicion, which is then not confirmed after clarification. However, it is absolutely exceptional for such a report to be made with demonstrably false factual claims in order to harm third parties, whatever the motive may be. This has now also been confirmed by scientific studies. Nevertheless, the possibility of abuse must always be taken into account. The only way to counter this is to make a clear commitment to the presumption of innocence until proven guilty, regulated in a guideline.
In addition to the finding that the systems introduced are hardly ever abused, there are other good reasons why the implementation of whistleblower protection can be more than just the fulfilment of a legal requirement. For example, large companies are increasingly requiring their suppliers to provide evidence of minimum standards in prevention as part of what is known as ‘third-party compliance’. This includes the existence of their own whistleblowing system. And when it comes to dealing with actual violations, there are also good arguments in favour of an efficient whistleblower system: by handling sensitive matters that may well be relevant under criminal law internally, the company remains in control of the proceedings and can decide autonomously, taking into account the company's interests, whether, for example, to report an incident to the authorities or simply deal with it internally. After all, when investigations are conducted by government authorities, the company is often merely a ‘spectator’ with no influence; the Code of Criminal Procedure does not generally recognise procedural rights for aggrieved companies. It is not uncommon for public reporting to present a completely distorted picture, turning the company, which is actually the victim, into the ‘perpetrator’.
In view of the aspects mentioned here and practical experience, after two years of legal regulation in Germany, it can be clearly concluded that not only does reason speak in favour of introducing an internal whistleblower system, but the overwhelmingly positive experience also confirms this.
The importance of reporting systems as a kind of ‘suggestion box’ should not be underestimated. Very often, employees use the external ombudsman service to literally let off steam and point out alleged grievances. In many cases, the reports relate to interpersonal conflicts within the company. And that brings us to the first major category of reports, namely those that can be broadly classified as personnel-related. Many of these cases resolve themselves because the whistleblowers are unable to substantiate their allegations and describe the incidents in detail, specifying the time, place, etc. The remaining cases can often be resolved through appropriate internal measures, such as mediation.
The second notable category of reports concerns a phenomenon that is massively underestimated in Germany, namely so-called ‘internal perpetrators’. These are employees who have strayed from the path of virtue and often cause massive damage to the company over many years without being detected by ingeniously dipping into the company coffers, sometimes in collusion with third parties. Unfortunately, scientific studies show that these criminal colleagues often hold positions of trust and that people would vouch for them without hesitation. It is estimated that this group of perpetrators causes several billion (!) euros in damage each year – and that is only in Germany. This assumption is based, for example, on the annual regulations of German fidelity insurance companies1. In addition to an internal control system, whistleblower systems are recognised as the most effective means of uncovering these activities.
Finally, a few comments on the content of reporting systems: First of all, it is important to have good internal communication with the indispensable ‘tone from the top’ of the owners or management in order to convince both employees and the works council of the usefulness and benefits of such a system. Furthermore, for several reasons, it is advisable to appoint an external professional who is bound by law to maintain confidentiality (e.g. a solicitor) as an ombudsman. An internal confidant would take their knowledge of highly sensitive matters with them when they leave the company - without any protection. Employees are also more likely to be reassured by the guarantee of confidentiality and anonymity offered by an external ombudsperson. After all, reports can then be made outside the company network and cannot be traced internally.
Finally, it is advisable to make the reporting system accessible for anonymous reports. In this regard, the Whistleblower Protection Act contains a technical error because, according to its wording, it does not include an obligation to accept and process anonymous reports. In fact, however, it is often anonymous reports that lead to the discovery of criminal offences involving significant financial losses (fraud cases). For this reason, the whistleblower system should also include an option for whistleblowers who have the courage to report the facts but do not want to reveal their identity.
Adequate solutions that include this option are whistleblower portals, which are an alternative to simple reporting centres. Such digital portals can be accessed via a link communicated within the company, are available in several languages and usually allow reports to be submitted in just a few steps while maintaining complete anonymity. Ideally, the whistleblower will then receive a code that serves as confirmation of the submission and also allows them to log back into the system at a later date. There, they can often not only view the report they have submitted, but also find additional options, such as a chat function that enables the ombudsman to communicate with a whistleblower who remains completely anonymous and, incidentally, leaves no trace, as communication does not take place via email. This option is very important in practice, as in most cases the whistleblower is contacted to clarify the plausibility of the report or to steer the necessary investigation into the right direction. Further advantages of using such a digital solution are the guarantee of cyber security and the lack of connection to the company network.
In conclusion, it is in the interest of companies to provide courageous whistleblowers with suitable channels for submitting relevant reports, regardless of existing regulations. In many cases, this serves to prevent or at least reduce economic damage and enables internal investigations to be conducted while protecting the company's own interests.