The new law will also protect whistleblowers against dismissal, demotion and other forms of retaliation and will require national authorities to inform citizens and provide training for public authorities on how to deal with whistleblowers.

Frans Timmermans, European Commission first vice-president, said: ‘Many recent scandals may never have come to light if insiders hadn't had the courage to speak out. But those who did took enormous risks.

‘So if we better protect whistleblowers, we can better detect and prevent harm to the public interest such as fraud, corruption, corporate tax avoidance or damage to people's health and the environment.’

The proposal will offer EU-wide protection for blowing the whistle on breaches of EU legislation in the fields of public procurement; financial services and money laundering as well as others.

It also applies to breaches of EU competition rules, violations and abuse of corporate tax rules and damage to the EU's financial interests. The Commission says it will encourage member states to go beyond this minimum standard and establish comprehensive frameworks for whistleblower protection based on the same principles.

All companies with more than 50 employees or with an annual turnover of over €10m (£8.75m) will have to set up an internal procedure to handle whistleblowers' reports. All state, regional administrations and municipalities with over 10,000 inhabitants will also be covered by the new law.

They will be required to have clear reporting channels, within and outside of the organisation, ensuring confidentiality and to develop a three tier reporting system covering internal reporting channels, reporting to competent authorities, and public/media reporting.

Authorities and companies will have to respond and follow-up to the whistleblowers' reports within three months for internal reporting channels.

The proposals mandate that all forms of retaliation are forbidden and should be sanctioned. If a whistleblower suffers retaliation, he or she should have access to free advice and adequate remedies (for example measures to stop workplace harassment or prevent dismissal). The burden of proof will be reversed in such cases, so that the person or organisation must prove that they are not acting in retaliation against the whistleblower. Whistleblowers will also be protected in judicial proceedings, in particular through an exemption from liability for disclosing the information.

The Commission says the proposal includes safeguards to discourage malicious or abusive reports and prevent unjustified reputational damage.

ACCA has welcomed the proposals, pointing out that the protection for whistleblowers currently in force in Europe is fragmented. The association said a balanced set of common minimum standards providing robust protection against retaliation of reporting persons would help bringing clarity and certainty, necessary to instill trust.

Jo Iwasaki, head of corporate governance at ACCA, said: ‘It’s vital that entities provide easily understandable and widely accessible information on internal reporting procedures as well as on procedures to report externally. It’s important to avoid discouraging individuals and make sure that employees properly get to grip with the process, and aren’t discouraged by a very legalistic list of conditions while the reporting of a matter of significance becomes delayed.

‘As always the devil’s in the details and implementation of the directive’s provisions will be decisive. This is just the beginning of the legislative journey for the proposal, and it’s unlikely to be all smooth sailing.’

Proposal for a Directive of the European Parliament and of the Council on the protection of persons reporting on breaches of Union law is here.

Report by Pat Sweet