Internal Whistleblowing in the US after Digital Realty Trust v Somers: Any Lessons to be Learnt from Europe?

Abstract

The US Supreme Court, in Digital Realty Trust, Inc. v Somers, held that employees, who only report securities law violations internally, are not whistleblowers and therefore do not qualify for whistleblower anti-retaliation protection under the Dodd-Frank Act. This decision is based on an accurate statutory interpretation and reflects a clear policy preference towards external whistleblowing in aid of the US Securities and Exchange Commission’s (SEC) enforcement efforts. Despite the strong incentive to have fraudulent practices and violations reported to the SEC, employees that only make internal reports should not be left without protection. On the other side of the Atlantic Ocean, a different approach is observed with more emphasis on internal reporting as the first course of action for potential whistleblowers. European countries tend to prioritise resolving potential issues through internal reporting channels before involving external regulatory authorities. This emphasis on internal reporting is rooted in the belief that it promotes a culture of trust and accountability within companies. Digital Realty Trust v Somers clarified the scope of whistleblower protection under the Dodd-Frank Act, but also initiated a much-needed discussion about the different paths available to whistleblowers and the factors that should be taken into consideration before a decision is made to report externally or internally. Although in principle there is no right or wrong decision, there are some lessons to be learnt in the US and the examples of the UK, France and the EU should not be overlooked considering how interconnected and interdependent our society is.