Halet v Luxembourg: The Final Act of the Luxleaks Saga

The Grand Chamber judgment of the European Court of Human Rights (ECtHR) on 14 February 2023 on the case Halet v Luxembourg has been characterised as victory for whistleblowers and the right to freedom of expression. The long-awaited judgment has put an end to a legal battle of more than 10 years for Raphael Halet and its outcome was considerably different than the previous decisions of the Luxembourg Court of Appeal and of the third Chamber of the ECtHR. The Court stated that whistleblowers should be protected under Article 10 of the European Convention on Human Rights (ECHR) when they report facts of public interest. The tax matters at hand were of public interest and Mr Halet was protected because he did not report an illegal practice or a wrongdoing, but certain information concerning the functioning of public authorities in a democratic society. He was recognised as a whistleblower rather than a criminal who stole private data and, by doing so, he contributed to a public debate, ‘giving rise to controversy likely to create a legitimate interest on the public’s part in having knowledge of the information in order to reach an informed opinion as to whether or not it reveals harm to the public interest’.

The Court had to decide whether Mr Halet’s criminal conviction, following the disclosure by him to a journalist of sixteen documents issued by his employer, had amounted to a disproportionate interference with his right to freedom of expression. The Luxembourg Court of Appeal had decided that the damage that Mr Halet caused to his employer, PricewaterhouseCoopers (PwC), was not outweighed by the interest in the public having the information. This position was confirmed by the third Chamber of the ECtHR. The Grand Chamber referred to its established case law and the famous Guja criteria. These criteria are: (1) the channel for disclosure, (2) the public interest, (3) the authenticity of the information, (4) good faith, (5) damage to the employer and an assessment of whether such damage outweighed the public interest, and (6) the sanction imposed. While the Grand Chamber examined the six criteria again, the focus was on the fifth and sixth criteria.

First, the Court clarified that the criteria should be examined without a specific order as there is no hierarchy or order to be followed in their examination. Concerning the balancing of the public interest in the disclosed information and the detrimental effects of the disclosure, the Court did not consider it as a conflict of rights (as suggested by the Luxembourg government). It examined, instead, whether the domestic courts struck a fair balance between, on the one hand, the public interest of the disclosed documents, and, on the other hand, the entirety of the harmful effects arising from their disclosure. The Grand Chamber stressed that the Luxembourg Court’s requirement of ‘essential, new and previously unknown’ disclosed information is not relevant. The Court highlighted that a public debate may be ongoing and additional information can come at a later stage. The fact that a public debate on tax practices was already in progress in Luxembourg could not reduce the relevance of the disclosed documents. The Court actually spent several paragraphs in its judgment on the importance of the debate around taxation and dubious practices of tax avoidance and tax optimisation extensively used nowadays. It is sometimes necessary for the alarm to be raised several times on the same subject before the public authorities, or the society as a whole, are mobilised and exercise increased vigilance.

On the issue of balancing the damage to the employer and the need of the public to be informed, the Court took a different stance compared to previous decisions. While it acknowledged the detrimental effect of the disclosures on PwC, it was decided that the Luxembourg Court of Appeal did not sufficiently justify why the damage suffered by PwC had not been outweighed by the general interest. The criticism of the Grand Chamber was that the Luxembourg Court of Appeal only referred to ‘damage to […] image’ and ‘loss of confidence’ but did not enter into details. In fact, PwC had ‘a difficult year’ following the Luxleaks investigations, but quickly increased its revenues and expanded its activities again. The Court concluded that, in the balancing exercise made by the domestic courts, the public interest in the information revealed was analysed narrowly and, on the question of the damage, the Luxembourg Court only focused on the damaged sustained by PwC, disregarding other relevant issues, such as the harm also caused to the private interests of PwC’s customers and to the public interest in preventing and punishing theft and in respect for professional secrecy. As a result, the Grand Chamber found that the Luxembourg Court of Appeal erred on the assessment of this criterion.

The Grand Chamber also examined the sixth criterion: the severity of the sanction. It highlighted the importance of whistleblowers for society, while stressing that any undue restriction on them may have a chilling effect on and dissuade potential whistleblowers to come forward. Regarding the criminal conviction of Mr Halet, the Court concluded that it was not proportionate in light of the legitimate aim pursued and Luxembourg’s interference with Mr Halet’s right to freedom of expression was not ‘necessary in a democratic society’. The Court awarded €15,000 non-pecuniary damage and €40,000 covering costs. It should be noted that Mr Halet spent almost ten years in this legal battle, so it is open to question whether this compensation can really make up for the financial damage he suffered, not to mention the damage to his career and professional standing. It should be taken into consideration that whistleblowers often lose their jobs and have to participate in lengthy and expensive legal proceedings, thus the courts should revisit the awarded compensations in the future, in order to ensure that sufficient redress is provided.

Apart from the undeniable impact of the judgment in relation to the right to freedom of expression, reference should be made to the notable protection offered to a whistleblower, who wanted to do the right thing, in good faith and without any intention to profit from it or to harm his employer. If the original criminal conviction had a ‘chilling effect’ on potential whistleblowers, who were considering speaking out about wrongdoings in their workplace, the Grand Chamber’s decision was a step towards the right direction: the direction of transparency, accountability and fairness. This will not be the end of questionable taxation practices and strategies that multinational companies use, in order to reduce their tax bills. However, whistleblowers can act as accountability mechanisms that will ensure that the public has the opportunity to form a clear and informed opinion on topics that have economic and social implications. Corporate taxation is not a topic that always sparks a public debate, but when issues of tax evasion and fraud arise, then the public interest in the disclosure of that information can outweigh all of the detrimental effects. Finally, Pwc will definitely re-evaluate its approach and business strategy in Luxembourg and abroad. The motivation should not be the fear of any future disclosures by whistleblowers, but the sustainability of its business. The memories from Arthur Andersen’s involvement in the scandals of Enron and WorldCom and its fate have not faded yet and serious consideration should be given as to where red lines need to be drawn regarding tax optimisation, tax avoidance and tax planning. If not, more ‘difficult’ years might come in the future.

The final act of the Luxleaks saga gave us a lot of food for thought and numerous issues to think about and write about, but most importantly provided invaluable legal analysis in the areas of freedom of expression, whistleblower protection, public interest and tax practices. As it happens in most similar cases, one side is celebrating and the other side is complaining, however what we should keep for now is that the Halet v Luxembourg legal battle is very likely to be a judicial milestone for the Strasbourg Court and the Council of Europe. Time will determine its precise legacy and the academic debates that will ensue will elaborate on its intricacies.

Stelios Andreadakis is a Reader in Corporate and Financial Law at Brunel University London.

Dimitrios Kafteranis is an Assistant Professor at the Centre for Financial and Corporate Integrity, Coventry University.