[CCWG-ACCT] TR: GAC advice and Board override issue

[Mathieu Weill]

Dear Colleagues,



During the co-chair lawyer call last week, Rosemary raised a concern
regarding whether requirements of 2/3 majority within the Board could be
legally imposed. Since Icann Bylaws have such provisions today, it was
decided that Rosemary would reach out to Jones Day to understand any prior
legal analysis conducted by Icann on the matter.



Below is a report on these discussions from Rosemary, which clarifies how
this requirement can be legally imposed.



Apart from mentioning this memo in the list of certified requests, we do
not foresee any specific action as a follow up.



Best

Mathieu



De : Rosemary E. Fei [mailto:rfei at adlercolvin.com]
Envoyé : mercredi 13 janvier 2016 23:49
À : Mathieu Weill (Mathieu.Weill at afnic.fr); Thomas Rickert; León Felipe
Sánchez Ambía (leonfelipe at sanchez.mx)
Cc : ACCT-Staff (acct-staff at icann.org); Sidley ICANN CCWG
(sidleyicannccwg at sidley.com); ICANN-Adler; Kevin B Espinola
(kbespinola at jonesday.com)
Objet : GAC advice and Board override issue



Dear Co-Chairs,



We spoke to Kevin Espinola at Jones Day earlier this week to discuss the
current provisions in ICANN Bylaws that provide that a 2/3 Board vote is
necessary to override certain advice from the GNSO and ccNSO consistent
with the Board’s governance role and individual directors’ fiduciary
duties under California nonprofit corporate law.  As we discussed with you
in our Friday call, we were interested in any legal analysis relating to
these provisions that might also apply to the proposed requirement for a
2/3 Board vote to override consensus GAC advice.  While Kevin was not
aware of any pre-existing legal analysis to share, based on factual
information he provided, we have now concluded that such a requirement can
be legally imposed.



As you noted in our call on Friday, the proposed GAC override requirement
has precedent in the current Bylaws: namely, under Annexes A and B, PDP
recommendations approved by a supermajority vote of the GNSO and ccNSO,
respectively, are required to be implemented unless the Board determines
by a 2/3 vote that the policy is not in the best interests of ICANN or the
ICANN community.  We asked Kevin if we could review any legal analysis by
Jones Day from when ICANN initially adopted these provisions; Kevin
indicated that he was not aware of any, but agreed to search Jones Day
files.  While Kevin acknowledged that there could be a risk that the
proposed provision would be invalid, he said he was comfortable with it in
light of (1) the longstanding, unchallenged practice under the GNSO and
ccNSO provisions cited above, and (2) the special nature of the GAC and
its members, who are appointed by their governments for their diplomatic
and Internet expertise.



Under the California Corporations Code, in fulfilling their fiduciary
duties, directors may delegate to, and rely on, a committee composed of
experts on matters within their expert competence, so long as the
directors act in good faith, after reasonable inquiry when the need is
indicated by the circumstances, and without knowledge that would cause the
reliance to be unwarranted.  (CA Nonprofit Public Benefit Corp. Code
Section 5231(b)(3).)  Accordingly, since we understand that the GNSO and
ccNSO members are experts in their respective fields and their
recommendations fall within the relatively narrow and technical realm of
that expertise, directors may rely on them to discharge their fiduciary
duties, subject to the override where a significant majority (2/3) of the
Board determines that such delegation is not appropriate.  Similarly,
while the realm of GAC advice is substantially broader (but not
unlimited), we conclude that insofar as the representatives in the GAC are
professional diplomats with expertise on matters of public policy and the
Internet, delegation to the GAC (subject to the 2/3 override) and reliance
by directors on GAC consensus advice for matters within GAC expertise,
should not give rise to a violation of corporate nonprofit law.



We emphasize that the Board would retain its supervisory role through its
ability to override any particular consensus advice with a 2/3 vote, as it
can with GNSO and ccNSO supermajority PDP recommendations.  (We note in
this connection that California law permits bylaws to require a
higher-than-majority threshold for Board action.)  Moreover, the Board
retains the power, with the approval of the community, to revoke the
arrangement altogether through the process for fundamental bylaw
amendments.



On the basis of the foregoing, we believe that the proposed requirement to
follow GAC advice unless rejected by a 2/3 vote of the Board would be
consistent with California law.



Sincerely,



Rosemary and Holly




Rosemary E. Fei
Adler & Colvin
235 Montgomery Street, Suite 1220
San Francisco, CA 94104
415/421-7555 (phone)
415/421-0712 (fax)
 <mailto:rfei at adlercolvin.com> rfei at adlercolvin.com
 <http://www.adlercolvin.com> www.adlercolvin.com



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