Initial comments on CWG-Stewardship draft proposal

["Richard Hill" <rhill@xxxxxxxxx>]

I refer to:

 
https://www.icann.org/en/system/files/files/cwg-stewardship-draft-proposal-w
ith-annexes-22apr15-en.pdf 

General comment
===============

On page 19 it states that the following element is required: "A contract
similar to the current NTIA IANA Functions Contract to perform the IANA
Functions post-transition".

A contract is an agreement between two parties. No entity (whether a
physical person or a legal person) may contract with itself.

On page 20, it states that the transition will involve "Creating PTI, a
separate legal entity that would be a 'wholly owned subsidiary' of ICANN -
in legal terms, an 'affiliate.' The creation of PTI ensures both functional
and legal separation within the ICANN organization."

PTI would for sure be functionally separate from ICANN, and it would be
legally separate in the same sense that, for example, FOO SA (a Swiss
corporation) is legally separate from FOO, Inc. (a US corporation), even if
FOO SA is wholly owned by FOO, Inc. [NOTE: the name FOO is used here to
refer to fictitious entities: no reference is intended to any real entity
with that name or a similar name.]

But there is no "real" separation between FOO SA and FOO, Inc.: FOO SA will
do whatever FOO, Inc. (its owner) tells it to do. And FOO, Inc., may be
legally liable for some actions or inactions of FOO SA (under the doctrine
of piercing the corporate veil).

Where or not there is "real" separation between ICANN and PTI, and thus
whether or not ICANN and PTI could really conclude a meaningful contract (in
the sense of an agreement between two separate entities) depends on the
details of how PTI would be set up. 

Since those details are not provided in the draft proposal, it is not
possible to say at this stage whether or not the proposal provides for
sufficient separation of the IANA function from ICANN.

That is, the proposal is incomplete.


III.A.i.a
=========

Section III.A.i.a states:

"The existing IANA naming functions department, administrative staff and
related resources, processes, data and know-how would be legally transferred
to PTI."

"At the outset, PTI would have as its sole member ICANN. PTI would be a
'wholly owned subsidiary' of ICANN - in legal terms, an 'affiliate' of ICANN
if PTI is a California public benefit corporation without owners. ICANN
would provide funding and administrative resources to PTI through an agreed
upon budget."

As noted above, I don't understand how PTI would be really separate from
ICANN if it is fully controlled by ICANN, which is what the description
above appears to imply.  Nor do I understand how, in such a setup, an
agreement between ICANN and PTI would be construed as a real contract
between two independent entities, rather than an internal arrangement
between ICANN and one of its subsidiaries.

III.A.i.b
=========

Section III.A.i.b states:

"As a separate legal entity, PTI would have a board of directors or
managers. The PTI Board could be an ICANN-designated board and have the
minimum statutorily required responsibilities and powers."

If ICANN designates the PTI Board, then how is PTI independent from ICANN?
For sure it is legally separate, but, as noted above, that does not
necessarily result in "real" separation. Again, consider that FOO SA (a
Swiss corporation that is wholly owned by FOO, Inc., a US corporation), is
not really separate from FOO, Inc. Especially if (as is commonly the case in
the real world) the board of FOO SA is named by the board of FOO, Inc. 

III.A.iii.a
===========

Section III.A.iii.a, no. 4, states "Post transition there will only be the
IFO and the Root Zone Maintainer." IFO stands for IANA Functions Operator,
meaning PTI.

Thus PTI would decide on all changes to the root zone file. If PTI is a
wholly-owned subsidiary of ICANN (which is what is proposed), then that
means that, in effect, ICANN is in control of the root zone file.

In my view, this creates a dangerous concentration of power. In particular
if ICANN and PTI are legally resident in the USA, because they would be
subject to US private law, meaning to US Congress and US court
interpretations of US laws.

Annex C
=======

Annex C lists principles and criteria that should underpin the transition.

I don't see anything in that Annex regarding jurisdiction and intellectual
property rights. As indicated above, I think that these are very important
issues that should be reflected in Annex C.

For example, it should be explicitly stated that the intellectual property
rights regarding the IANA function should be transferred to an independent
entity, as proposed by the numbers community.

And it should be explicitly stated that the IFO should be granted immunity
of jurisdiction (but subject to suitable binding arbitration) or, failing
that, be incorporated/registered/resident in an a neutral jurisdiction, such
as Switzerland.

Annex E
=======

Annex E lists contract provisions to be carried over.

The existing provisions on intellectual property rights and data rights
should be added.

Annex F
=======

Annex F describes a future IANA functions review mechanism.  The composition
of the review teams is specified on page 52.

The proposed review team consists entirely of stakeholders from ICANN.  This
is not representative of the global multistakeholder community, which is
broader than ICANN.

The NTIA's intent is "to transition key Internet domain name functions to
the global multistakeholder community". The current proposal is not
consistent with that intent, because it proposes to transition a key
element, the review process, to the ICANN community, which is much narrower
than the global multistakeholder community.

Missing elements
================

I don't see any references to where PTI would be legally
resident/incorporated, nor to the jurisdiction that would apply to PTI and
to agreements between PTI and ICANN. As I've stated before, this is a key
issue. If PTI is resident in the USA, it would be subject to US law, which
has significant implications, in particular if, as is proposed, PTI has full
authority over changes to the root zone file. For example, the US Congress
could pass a law that would force PTI to delete some particular ccTLD from
the root zone.

I don't see any references to who would own the IANA trademark (currently
owned by ICANN) and the IANA.ORG domain name. Nor any references to who (if
anybody) owns the rights to the IANA databases.

Both of the elements mentioned above are, in my view, essential elements for
the transition. 

So, again, it is my view that the current proposal is incomplete.