[CCWG-ACCT] A plea for time

Mon Oct 12 22:06:25 UTC 2015

+1 Greg.

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From: accountability-cross-community-bounces at icann.org [mailto:accountability-cross-community-bounces at icann.org] On Behalf Of Phil Corwin
Sent: Monday, October 12, 2015 2:14 PM
To: Greg Shatan; Chris Disspain
Cc: ccNSO Council; ccNSO Members; CCWG Accountability
Subject: Re: [CCWG-ACCT] A plea for time

+1. Excellent responses, Greg.

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From: accountability-cross-community-bounces at icann.org<mailto:accountability-cross-community-bounces at icann.org> [mailto:accountability-cross-community-bounces at icann.org] On Behalf Of Greg Shatan
Sent: Monday, October 12, 2015 4:09 PM
To: Chris Disspain
Cc: ccNSO Council; ccNSO Members; CCWG Accountability
Subject: Re: [CCWG-ACCT] A plea for time

Chris,

Thank you for your email.  Your email raises a number of issues; my responses are in-line in bold below.

Greg

On Sun, Oct 11, 2015 at 12:05 PM, Chris Disspain <ceo at auda.org.au<mailto:ceo at auda.org.au>> wrote:
Greetings,
As we approach ICANN Dublin I have been asked by some of my ccTLD colleagues to set out clearly why as a ccTLD manager I support the Board proposals for improving ICANN's accountability as part of the transition.
In essence for me it’s all about time.

GS: Time is a double-edged sword in this case.  I believe that a revised CCWG proposal that adopts the Board's comments will differ significantly enough from the Second Draft that a third public comment period will be required.  As such, I think the shortest path leads through the Single Member model, not away from it.  While there are still questions under discussion regarding the Second Draft Proposal, I believe that there at least as many, if not more, stemming from the Board's proposal.  (I note the questions raised in my chart analyzing the Board's comments, most of which I believe remain unanswered.)

I believe that we, the community, can get the enhanced accountability we want now without the need for wholesale structural change.

GS:  I remain concerned about the level of true accountability in the Board's proposal.  Accountability is inextricably intertwined with enforceability, and I believe the Board's proposal fails to deliver on enforceability. 

I'm not against change or indeed any of the models being proposed but I am against making such changes without carefully considering them over time. There is a significant amount of work to be done before deciding to make such important structural changes and all of that will take time and more research and stress testing and unf

oreseen consequence analysis and impact analysis.
GS:  I think this discounts the significant level of work and consideration that has already occurred in the CCWG, and the amount of time that has gone into this process.

In essence the Board has supported the CCWG’s proposed fundamental bylaws and the binding IRP and has suggested that there be a Community IRP and a further fundamental bylaw setting in place an ongoing improvement mechanism that will allow the community to take the necessary time to consider the structural changes and to have confidence that the proposals arising from such a process will be implemented.

GS:  It's good that the Board supports the fundamental bylaws and the concept of a binding IRP, but these are only two (or maybe only one and a half) steps in the right direction.  I think the Board's proposals regarding the IRP and the MEM proceeding vary in such significant ways from the CCWG's IRP proposals

that support does not extend much beyond the concept of making the IRP binding (and even the interpretation of "binding" is troublesome -- see below).

I believe that the Community IRP does provide the community with the rights it seeks and that it can be implemented in a timeframe that does not jeopardise the transition.

GS: I am confident that the CCWG proposal can be implemented in a timeframe that does not jeopardize the transition, and I would be even more confident if the Board would join the CCWG in improving the CCWG proposal within the structural framework proposed by the CCWG.  If the tug-of-war continues, that could jeopardize the transition.

 The Community IRP is an independent arbitration process for hearing community claims that the Board has acted outside of its by-laws. Under the process there is a legally enforceable and contractual obligation on ICANN to comply with a decision of the arbitration panel.

GS: Under the Board's proposal, the Community IRP would be limited to fundamental bylaws, which is a concern.  While a binding arbitration decision is generally "legally enforceable," the issue of whether there will be a legal person with standing to enforce is very much still open.  I believe this would require the "MEM Issue Group" to form an Unincorporated Association (or force one or more SOACs to form UAs) before commencing the Community IRP (or would force SOAC leaders to bring both the IRP and any enforcement action in their individual names).  The issue of whether a "default judgment" in an IRP is enforceable is also an open question.  According to advice received today from CCWG counsel, there would likely be significant additional hurdles in attempting to enforce a default judgment (as well as hurdles in getting a default judgment in the first place).

I believe that the community find ourselves in our current difficult situation because, with the best of intentions, the CCWG’s attorneys have been instructed to come up with models that deliver ‘the highest possible levels of enforcement’. It is not that the Community IRP cannot deliver the enhanced accountability that we want but rather that it is perceived, by some, as inadequate because there is a different mechanism that delivers a higher level of enforceability.

GS: I don't think this accurately reflects the instructions to counsel or counsels' working methods.  Counsel are working for us, and not leading us by the nose.  We've asked for alternatives and they have given us alternatives.  We generally didn't like the alternatives where enforceability seemed uncertain.  In any case, all instructions to counsel are transparent and available on the CCWG Wiki.  As for the Community IRP, I think it is perceived as inadequate due to issues of standing to commence a court action to enforce a binding arbitration and the proposed limitation of scope to fundamental bylaws.  As such, it is far from clear that the Community IRP can deliver the enhanced accountability that we want.

The CCWG appears to be requiring a mechanism that allows the community (in whatever guise we finally agree is acceptable) the absolute final say. The right to step over the Board's fiduciary duty without any check or balance in place to allow for the testing of the Board's claim that acting would indeed be in breach of such duty.

GS:  The first sentence is true, with regard to certain narrowly defined powers to exercised as a last resort -- removal of directors, recall of the Board, approve fundamental bylaws changes, veto standard bylaws changes, and veto budget/strat plan/op plan.  Outside of these areas, the community would not have the "absolute final say."  With the IRP, this is clearly not the case, since there the IRP panel would have the final say.  In a membership public benefit (non-profit) corporation, the members do indeed get the last say on certain things, but certainly not on everything.  Where the membership has the final say, the Board will not be in breach of its fiduciary duty if it follows the directions of membership -- such is the relationship of membership to Board.  Indeed, the Board would be in violation of its bylaws, probably statutes and possibly its fiduciary duties if it did not follow the directions of membership.  However, without membership, the Board will be able to invoke fiduciary duty as a reason not to follow the decision of the community.  We do have to look further into the boundaries and obligations of members in a membership public benefit corporation to understand better how to avoid a "rogue" membership, both as a matter of law and as a matter of process.  For instance, the assets of a public benefit corporation are always dedicated to the public good, and cannot be used for private or personal gain; this applies equally to decisions by membership as it does to Board decisions.  Similarly, I don't believe the membership can cause the corporation to act in a way that violates its Articles of Incorporation or Bylaws; this limits membership just as much as it does the Board, "fiduciary duty" or no.  Finally, we could consider instituting a consultative process where the Board would have a limited period of time to make its case that in exercising one of membership's powers (remove/recall directors, approve/veto bylaws, veto budget/strat plan/op plan), the membership is violating the Articles or Bylaws.

I firmly believe in the corporate governance structures adopted by most corporate bodies around the world. Board members are appointed to manage the affairs of the organisation on the understanding that they are legally bound to act in the best interests of the organization rather than any one member or community. Such best interests are set out in the by-laws - in ICANN's case for example, the security and stability of the Internet as a whole. The Board has a fiduciary obligations to act in that way.

GS: This is comparing apples and oranges, assuming we are talking about for-profit corporate bodies.  Corporate bodies have owners/shareholders.  In that corporate governance structure, the Board is ultimately accountable to the owners of the company.  When shareholders vote for directors (and especially when a shareholder has a large enough position to appoint a board member), they appoint that Board member because their views are consistent with that shareholder's (or those shareholders') view of the best interests of the corporation.  The best interests of a corporation (any corporation) are open to differing views and judgments. If we are talking about non-profit corporate bodies, then that firm belief should include a belief in the membership structure as a widely-recognized, well-tested form of corporate governance structure.  Finally, "fiduciary duty" should not be used as a monolithic mantra -- a non-profit board member has three specific duties that make up their fiduciary duty -- the duty of care, the duty of loyalty, and the duty of obedience.  The first two are firmly owed to the organization alone.  Only the duty of obedience binds the board member to act consistently with the mission, purpose and core values of the corporation, primarily as set forth in its Articles and Bylaws.  As noted above, I don't believe the Members have the right or ability to cause the corporation to violate its Articles or Bylaws, as measured by the reasonable judgment of the Membership.

The ICANN Board has proposed the Community IRP as binding arbitration. The CCWG’s attorneys have said that the Board can refuse to implement such a binding arbitration decision if it claims that to implement it would be a breach of its obligations to act in the best interests of ICANN. This is true BUT the community representatives can then go to court and a court will enforce the arbitration decision if it disagrees with the Board's view. In my opinion this is precisely the type of safeguard we need to have in place because it ensures that an elected board made up of representatives of the multi-stakeholder community will always act, first, in the interests of a stable and secure Internet and it puts in place an independent arbiter to decide, in the final analysis, if the community or the board is right.

GS:  This paragraph reveals a fundamental misunderstanding of what an enforcement proceeding is, at least in US courts (and most courts I'm familiar with, other than perhaps Dubai).  In a proceeding to enforce a judgment resulting from binding arbitration, the court does not see "if it disagrees with the Board's view."  The court does not conduct a substantive review of the arbitration decision at all, much less a "de novo" review, to see whether it agrees with the arbitrators.  The court, in reviewing the award, is supposed draw all reasonable inferences to support the award and display substantial deference towards the panel's determination.  (One exception, under California state law, is that the parties to an arbitration can expand the scope of review by putting a differest standard in their initial agreement to arbitrate, but that would be highly unusual, and could essentially gut the idea of an enforcement proceeding.)  An enforcement proceeding is basically a proceeding to turn the arbitral award (which only has the force and effect of a contract between the parties) into a final and non-appealable court judgment.  The court can modify, correct or overturn a binding arbitration decision only if it fails the "reasonable inference/substantial deference" test, or if the losing party files a petition based on bad acts by the arbitrator (e.g., corruption, fraud, misconduct, exceeding arbitrator's powers, unduly prejudicial acts, failure to disqualify).

The alternative, it seems to me, is to create, now, a system where fiduciary duty is abandoned and the will of the community holds sway. That is in effect what happens under the membership model as described by the CCWG’s attorneys.

GS:  I disagree strongly with that characterization of the Single Member model.  This makes the Single Member model sound like some anarchic combination of the worst excesses of the French Revolution and the "Lord of the Flies." (apologies for culturally-based references.)  Fiduciary duty is absolutely not "abandoned."  The Board has absolutely the same obligations to act with a duty of care and a duty of loyalty to the corporation, and a duty of obedience toward the ICANN mission, purpose and core values.  In most cases, its actions are not subject to review, or if they are, it is in an IRP, where the mission, purpose and core values of ICANN (the heart of the duty of obedience) will be the standard for measurement.  Only in the exercise of the powers would the "will of the community" get the last word, and only after a substantial process designed to resolve matters before the powers must be exercised.  Even then, the community is not free to do as it pleases -- it cannot convert the use of assets so they are no longer benefiting the public, and the community must in its judgment still be honoring the ICANN mission, purpose and core values.  Just because the community as member doesn't have "fiduciary duties" to the corporation, it doesn't mean that the community is without duties, obligations and boundaries.  Finally, I'm not sure if the reference to the CCWG's attorneys is meant to imply "look at what your own counsel told you" or "blame your counsel for what they got you into," but I reject both.

This may well be acceptable in the future when all of the nuances have been thought through and the necessary community conflicts and ethics rules, accountability mechanisms and disclosure requirements have been agreed. But it will take time and testing and a fuller discussion.

GS:  This is based on the false premises of abandonment of fiduciary duty and that the community is simply not ready for the task of holding ICANN accountable.  If the community is not ready, how can ICANN be ready? I'm not saying the community is perfect, and there are potential implementation matters such as those above that could improve the community's abilities to act as the party that will hold ICANN to account.  I don't think these will take so much time and testing and discussion that we should abandon our path.  If we need to choose between an inadequate set of accountability mechanisms and giving the community we have the accountability mechanisms it needs, the choice is easy.

Fiduciary responsibilities and duties are there for a reason. I think that some in the community feel that the Board and ICANN legal sometimes use the ‘cloak’ of fiduciary responsibility to avoid doing what the community wants. Whilst I don’t believe that is true I do empathise with the feeling. To my mind the solution (at least at this time during the transition) is NOT to create a mechanism under which fiduciary duty is held by no one but rather to create a mechanism where the community can test the Board's claims about such duty. The Community IRP as suggested by the Board does just that.

GS:  Again, no one is proposing a mechanism "under which fiduciary duty is held by no one."  The Board's duties remain unchanged under any proposal.  The IRP remains a method of testing the Board's claims about those duties under any proposal. The differences lie elsewhere -- in whether the community powers will be diluted (to the point where they cannot be considered powers) and whether the IRP is a readily enforceable arbitration. 

 I want to stress again that I am not against any of the proposed models put forward by the CCWG. But I can't agree the models at this stage because I don’t believe we have enough detail and I think the community as a whole should take their time in considering making such important changes. And I do not agree with those who claim that "we must do it now because it's our only chance".

GS:  I'm glad you don't think it's our only chance, and I trust you on that.  Where we disagree is on whether we have sufficient detail and whether we've taken sufficient time, and whether the outcome of the CCWG process is sufficiently well-crafted.  Trading the CCWG proposal for one with even less detail and less time devoted to it, and which raises serious concerns about sufficiency, does not seem like an improvement.  At best, it trades one set of problems for another.  I don't deny we can use some good tightening up and some good implementation planning.  If you will join us in tightening the bolts, rather than having us park the car and board the bus, we'll get to our destination faster.

I am very much looking forward to spending time with my ccTLD colleagues during the Dublin meeting and hope we will have the opportunity to talk, and not just about the transition.

GS:  Although I'm not a ccTLD colleague I still look forward to Dublin and the opportunity to talk ... and possibly about something besides the transition!

Greg

Cheers,

Chris Disspain | Chief Executive Officer

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