MEPs pass law that would prevent Panama Papers

As politicians pay lip service to the Panama Papers, Maltese MEPs toe party line and vote for a law that could target journalists and their sources who divulge ‘trade secrets’

What do the Panama Papers, Dieselgate, LuxLeaks and Swissleaks have in common? – they were historic journalistic endeavours which uncovered secret corporate activities the public had a right to know about.

But while Malta is gripped in the fever of the fallout from the Panama Papers – with minister Konrad Mizzi and the Prime Minister’s chief of staff, Keith Schembri, facing unrelenting calls from the Opposition, civil society and the independent press for their resignation – Maltese MEPs from both sides of the political divide have voted for a law that could incriminate whistleblowers and investigative journalists who breach corporate secrecy.

Both Labour and Nationalist MEPs voted with the two major socialist and centre-right blocs to pass the directive which will oblige member states to ensure companies that fall victim to “misuse of trade secrets” can defend their rights in court, seek compensation, and protect any confidential information during judicial proceedings.

Trade secrets law could muzzle press sources

The resolution, which passed by 503 votes to 131, was opposed mainly by MEPs from the European Green Parties and the United European Left, which claim there are no proper safeguards for investigative journalists and whisteblowers who leak information.

Labour MEPs Alfred Sant and Marlene Mizzi, and Nationalist MEPs David Casa, Roberta Metsola and Therese Comodini Cachia voted in favour. Labour MEP Miriam Dalli was absent.

Broadly trade secrets can be technical – manufacturing processes, recipes, chemical compounds – and commercial, such as customer lists, marketing studies, product data: much akin to data such as Mossack Fonseca’s client list and those of the HSBC private bank in Geneva.

Journalists were quick to condemn the proposal back in 2013, with a petition against the directive launched by investigative journalist Élise Lucet collecting almost 500,000 signatures.

While the law is intended to protect small companies who depend on confidentiality to protect their research, Lucet said that the approved law gives secrecy excessive protection.

“With this directive, you would have never heard of LuxLeaks, the Monsanto pesticides scandal, or the Gardasil vaccine scandal,” she said.

International journalists’ unions and even French MPs say the law would allow EU states to endanger whistleblowers and journalists.

“Coming just a week after the Panama Papers leaks, which have again underlined the vital role of whistleblowers and investigative journalists in shedding light on crucial information in the public interest, this is a major blow and has been criticised by LuxLeaks whistleblower Antoine Deltour and the journalist that reported on the scandal, Edouard Perrin,” German MEP Julia Reda told MEPs on Thursday.

The French journalists’ union says it resembles a blanket right to corporate secrecy. And the European Federation of Journalists (EFJ) says that despite valuable improvements on the original draft from the European Commission, the newly adopted directive raises doubts as to whether journalists and in particular their sources are appropriately protected.

“Exceptions foreseen under Article 5 for the exercise of freedom of expression and information are not clear enough, which means that safeguards for freedom of the media will largely depend on how national governments implement the Directive. In addition, whistleblowers are potentially left exposed insofar as they will be held to prove that the disclosure of information is made ‘for the purpose of protecting the general public interest’,” the EFJ has warned.

It is unclear how something like the Panama Papers, which leaked 11.5 million documents from Mossack Fonseca, would affect “infringers” who pass such confidential documents to journalists.

The directive MEPs voted on says that it is up to member states to ensure their laws would dismiss cases from companies when the disclosure was carried out “for exercising the right to freedom of expression… including respect for the freedom and pluralism of the media”, and to reveal misconduct or illegal activity “provided the respondent acted for the purpose of protecting the general public interest”.

But much of the offshore tax arrangements worked out by Mossack Fonseca and even their European agents were also legal insofar as was allowed by national laws.

Therese Comodini Cachia, who addressed the plenary on Thursday, welcomed the directive largely because it provided researchers and investors with much-needed protection. “European researchers were in limbo on safeguarding their work until it was advanced enough to entitle them to register it or publish it under their name.”

But it was an ironic twist for the same body of lawmakers who in 2015 awarded former PricewaterhouseCoopers whistleblower Antoine Deltour the European Citizens’ Prize for having revealed Luxembourg’s sweetheart tax deals for multinationals, under the premiership of Jean-Claude Juncker – today the president of the European Commission.

Those revelations were fundamental to MEPs in November who called for country-by-country reporting of multinationals’ profits so that they pay full tax on their earnings. Those plans were presented to the public by the European Commission this same week.

What the law says

The directive, informally agreed with ministers before the vote, introduces an EU-wide definition of “trade secret”, meaning:

• information which is secret;

• has commercial value because it is secret;

• and has been subject to reasonable steps to keep it secret.

It would oblige EU member states to ensure that victims of misuse of trade secrets are able to defend their rights in court and to seek compensation. The agreed text also lays down rules to protect confidential information during legal proceedings.

Rapporteur Constance Le Grip, from the centre-right European People’s Party, claims the law balances out the protection of the fundamental freedoms of opinion, of expression and of the press, with the rights for redress for victims of corporate theft.

The law defines an ‘infringer’ as anybody who has unlawfully acquired, used or disclosed a trade secret.

But ‘unlawful’ acquisition will include unauthorised access of copying of electronic files that contains the trade secret, “any other conduct considered contrary to honest commercial practices”, anyone who is “in breach of a confidentiality agreement”, or any other duty not to disclose the trade secret.

Additionally, it will be unlawful for journalists – critics says – to publish the information, since ‘infringing goods’ that have used ‘trade secrets’ cannot be brought to market.