[Ccwg-auctionproceeds] [Ext] Re: Auction Proceeds Mechanism A - Internal Department at ICANN

Xavier J. Calvez xavier.calvez at icann.org
Thu Nov 21 00:51:55 UTC 2019

Fully agree.
The ICANN community has expertise in grant giving activities, acquired outside of ICANN’s activities. So is the case for ICANN staff. We know there is grant giving expertise in the existing ICANN staff, though we have not yet done a thorough and deep inventory of it, nor do we know if this expertise lies with people who could be reallocated to the Auction Proceeds distribution activities once it will be launched.
Also to keep in mind, ICANN org personnel will not require the expertise to evaluate projects to which grants are allocated since this will be done by a separate panel. Separately, not all tasks involved in this activity will require grant-giving type of expertise (Finance, project management,…). Lastly, as with everything that we do for the first time, we will learn…, in addition to bringing required skillset.

Thank you.



Xavier Calvez
SVP & Chief Financial Officer
P: +1 (310) 301-5838 (Direct) | M: +1 (805) 312-0052
E: xavier.calvez at icann.org<mailto:xavier.calvez at icann.org> | www.icann.org<http://www.icann.org/>
12025 Waterfront Drive, Ste 300, Los Angeles, CA 90094

From: Sam Lanfranco <sam at lanfranco.net>
Date: Wednesday, November 20, 2019 at 12:15 PM
To: Xavier Calvez <xavier.calvez at icann.org>, "ccwg-auctionproceeds at icann.org" <ccwg-auctionproceeds at icann.org>
Cc: Alan Greenberg <alan.greenberg at mcgill.ca>, "Aikman-Scalese, Anne" <AAikman at lrrc.com>, "erika at erikamann.com" <erika at erikamann.com>, Becky Burr <becky.burr at board.icann.org>
Subject: [Ext] Re: [Ccwg-auctionproceeds] Auction Proceeds Mechanism A - Internal Department at ICANN


Re: "While ICANN org may require to add skillset (insistance on “may”)..."

With my albeit limited experience around grant giving, working at both ends of the process, I would stress that it is an absolute certainty that all three Mechanisms will require an appropriate skillset that currently is not resident for Mechanism A, might exist in Mechanism B, and would have to be build in Mechanism C. The proper management of a competitive grants process is complicated and demands particular skills that could not be supplied through secondment or redeployment from ICANN staff.

Sam Lanfranco
On 11/20/2019 2:49 PM, Xavier J. Calvez wrote:

There are references in this email thread about ICANN org hiring and firing 20 people under mechanism A.
I am not sure where the idea of ICANN org hiring 20 people come from nor how it was determined. ICANN org has not produced any evaluation of incremental resource requirements driven by any mechanism at this stage.
While ICANN org may require to add skillset (insistance on “may”) and is likely to need more resources to address the auction proceeds distribution process, under any mechanism, we have not produced any analysis about it at this stage. Such analysis is dependent on many factors, including the general level of workload of the organization during the expected period of disbursement.
Generally, ICANN org, like most organizations, would address temporary work and activities with temporary resources, whichever form such temporary resources would take. In addition, under mechanism C, there is more likelihood that the resources in the foundation be made redundant as the distribution process winds down than in mechanism A. In mechanism A, the level of incremental resources would be less, and the likelihood of redundancy would be less as result, and also because resources not needed anymore could be reallocated within the organization as and if needed.

Separately, regarding the point of risks and control:

  *   Under Mechanism B and C, there are risk and costs associated with the complexity of operating a mechanism that involves one or several parties in addition to ICANN. Sam and I made these points several times over the past CCWG AP meetings. I am happy to elaborate further but the illustration used of the discussion of PTI is very helpful as the actual IANA functions are exactly the same before than after the creation of PTI, but the subcontracting of most of the IANA functions to PTI has created complexities that create risks that require more resources, associated with the governance around the IANA functions.
  *   As a reminder to inform your discussions on mechanisms A,B and C, I am attaching a presentation provided to this group in June 2017, notably the slide #7, which describes that ICANN’s obligations to ensure the funds are adequately used are the same, irrespective of the number intermediate parties inserted between ICANN and the end user in the process. There is not less obligations for ICANN to ensure funds are adequately used in mechanism C but there is more risks and costs to ensure such funds are adequately used.

Thank you.



Xavier Calvez
SVP & Chief Financial Officer
P: +1 (310) 301-5838 (Direct) | M: +1 (805) 312-0052
E: xavier.calvez at icann.org<mailto:xavier.calvez at icann.org> | www.icann.org [icann.org]<https://urldefense.proofpoint.com/v2/url?u=http-3A__www.icann.org_&d=DwMDaQ&c=FmY1u3PJp6wrcrwll3mSVzgfkbPSS6sJms7xcl4I5cM&r=IWWGaKyGUGcKQNGe7LtArAou7HP6fPR5aWjbPBUFZ3k&m=nER690hZraR54-LBUUodFNZxnzlGeuZ4ncjxjPdXxLA&s=syFOjjivbqCMmKGD2kB5yTYV_djLX8Gci15_PpmI9pg&e=>
12025 Waterfront Drive, Ste 300, Los Angeles, CA 90094

From: Ccwg-auctionproceeds <ccwg-auctionproceeds-bounces at icann.org><mailto:ccwg-auctionproceeds-bounces at icann.org> on behalf of Alan Greenberg <alan.greenberg at mcgill.ca><mailto:alan.greenberg at mcgill.ca>
Date: Tuesday, November 19, 2019 at 8:37 PM
To: "Aikman-Scalese, Anne" <AAikman at lrrc.com><mailto:AAikman at lrrc.com>, "erika at erikamann.com"<mailto:erika at erikamann.com> <erika at erikamann.com><mailto:erika at erikamann.com>, Becky Burr <becky.burr at board.icann.org><mailto:becky.burr at board.icann.org>
Cc: "ccwg-auctionproceeds at icann.org"<mailto:ccwg-auctionproceeds at icann.org> <ccwg-auctionproceeds at icann.org><mailto:ccwg-auctionproceeds at icann.org>
Subject: Re: [Ccwg-auctionproceeds] Auction Proceeds Mechanism A - Internal Department at ICANN

At 19/11/2019 07:24 PM, Aikman-Scalese, Anne wrote:

Hi Alan.   I apologize  - the 3/4 vote required to amend Fundamental ByLaws is for 3/4 of the Board of Directors.  The approval of the EC is listed in Annex D to the ByLaws and apparently requires approval of three EC Decisional Participants as well as the condition that the ByLaws amendment is “(B) not objected to by more than one Decisional Participant.”   Annex D Section 1.4 (b) (i).  So if two Decisional Participants object, we are back to “square one” as you say.  And that makes the survey very important.

If these same decisional participants approve the entire report allowing it to go to the Board, it would be an interesting situation if they then refuse to support or even object to the Bylaw.

To clarify,  I don’t think anyone is trying to escape Accountability.  Everyone agrees that grants shouldn’t be subject to being revoked and that ICANN should minimize the risk of adverse action (disputes) in relation to its management of Auction Proceeds.   Everyone also agrees that costs should be managed prudently.

You may think that keeping grant-making inside the ICANN organization is equally safe in the above respects for ICANN, its Board of Directors, and all grant recipients.   ALAC may want to support Mechanism A if, in fact, it is the lowest initial investment, for that reason alone.

To be clear, I am not speaking on behalf of ALAC. In fact, the ALAC appointed members to this CCWG have tended to have differing opinions.

  However, I don’t think the Proposed Final Report makes it clear which is the lowest cost alternative in the long run.  20 new ICANN employees with benefits would be expensive and I would assume they would have to be compensated from Auction Proceeds monies.  It’s likely easier to “Sunset” Mechanism B so you don’t have to fire 20 people.  Mechanism C would provide incentives for other organizations and foundations to make additional contributions to an ICANN charitable foundation so there are many trade-offs. I’m sure the CCWG must have discussed these trade-offs over many sessions.

I am not sure we ever were aiming at lowest cost. There has always been strong preferences that in some cases were despite the costs.


The risk management issue doesn’t seem nearly as obvious to me as it does to you, but many thanks for engaging in the discussion in a way that helps us all clarify the considerations in advance of issuing the Proposed Initial Report and conducting the survey.


From: Alan Greenberg <alan.greenberg at mcgill.ca><mailto:alan.greenberg at mcgill.ca>
Sent: Tuesday, November 19, 2019 4:34 PM
To: Aikman-Scalese, Anne <AAikman at lrrc.com><mailto:AAikman at lrrc.com>; Erika Mann <erika at erikamann.com><mailto:erika at erikamann.com>; Becky Burr <becky.burr at board.icann.org><mailto:becky.burr at board.icann.org>
Cc: ccwg-auctionproceeds at icann.org<mailto:ccwg-auctionproceeds at icann.org>
Subject: RE: [Ccwg-auctionproceeds] Auction Proceeds Mechanism A - Internal Department at ICANN

See embedded replies.

At 19/11/2019 04:35 PM, Aikman-Scalese, Anne wrote:
Thanks Alan.  It̢۪s thethe desire to set up a situation which readily achieves the necessary 3/4 EC approval of the ByLaws amendments that causes me to ask these clarifying questions re the exact nature of CCWG Consensus and making that clear in the Proposed Final Report.

I'm not sure what you mean by "3/4". If memory serves me, the approval of a Fundamental Bylaw requires the active support of at least 3 of the 5 EC members and rejection by no more than 1 of the 5.

In this case, I do not see  an obstacle to approval, probably unanimous. Before we can get to that stage, this CCWG will go to the chartering organizations. That is the five EC Members plus the SSAC and RSSAC. I see real problems going forward to the Board if most of the chartering orgs do not approve it, so once it goes to the board for action, most or all of the EC members will have already given their support.  If they do not do that, then I see the report coming back to us first, before it even gets to the Board.

Regarding the mechanism to be chosen, there is something about the way PTI was set up (as further described by Samantha and as further set out in the ByLaws in Section 16) that looks very “clean” to me in terms of clearlearly identifying recommended ByLaws changes as to the permitted Accountability challenges and those which will become inapplicable.

As far as I can see, the only relation between PTI and the accountability measures is that the EC can object to the PTI budget, can object to ICANN trying to divest itself of PTI (in a variety of ways) and how ICANN handles recommendation to PTI reviews. The other EC actions all relate to things in ICANN proper. None of what we are talking about is an attempt to stop the EC from challenging how auction funds are handles on a global basis. The Bylaw change we are discussing is for how applicants can (or rather cannot) challenge.

The EC will always have control over the auction process on a global scale because they always have the authority to remove the entire ICANN Board. We cannot (or rather will not) change that.

In addition, I note that Accountability Work stream 2 implementation is not complete.   So, for example, having worked actively on one of the Subgroups in Accountability Workstream 2, I have to ask how the Chartering Organizations may consider the CCWG recommendations in relation to the risk of challenges once the Work stream 2 Recommendations are finalized and implemented.   Would there be, for example, an available challenge re violation of the ByLaws (as amended to implement Workstream 2) based on an alleged Human Rights violation by ICANN in the administration of the Auction Funds?  It seems to me that if ICANN employs 20 additional staff as contemplated in Mechanism A, that risk is increased.  (20 staff is assumed across all Mechanisms.)

I see no impact regardless of mechanism. ICANN will be responsible to ensuring it meets its Bylaws whether the auction work is done by staff, or partially or entirely subcontracted. We cannot avoid obligations just by sub-contracting (otherwise everyone would subcontract everything and avoid all liabilities.

I would be inclined to assess the risk as being lower where administration and grants are concentrated in an entity other than ICANN.   In the case of Mechanism B, risk reduction would be due to the expert independent contractor relationship, though admittedly ICANN controls the RFP process and would be supplying some of the staff as well as adding the function to its budgeting and audit processes.   In the case of Mechanism C, risk reduction would be due to the independent Board of Directors and independent staffing, as it is with PTI.

I ALL mechanisms we will use an indep expert group to do the application assessment and decide on awards.

PTI may have a Board, and that may alter legal liabilities, but ICANN has control over that Board and its budget and I do not believe the it can be isolated from PTI actions if it allows them to happen.

If valid, these observations may bear on the draft Proposed Final Report at page 19, including Marika’™s request for further clarification [MK6] about what is meant by “a healthy degree of independence” and what the CCWG  hopes to achieve with that goal generally (and not just in relation to the possible establishment of a foundation.)  I would say the goal of a “healthy degree of independence” is is controlling risk of expensive challenges to ICANN and its Board and to the Auction Proceeds per se.  In other words, the greater distance ICANN maintains from the grant-making process, while still exercising its fiduciary oversight duties, the lower the risk to ICANN, its Board, and the funds.

As I understand it ALL mechanisms will have independence of the grant making process. Period.

Challenges will always be possible for potentially all sorts of reasons. The only challenges we can control are those from applicants.

Of course risk reduction has to be balanced against costs.  In this regard, it would be helpful to have some additional information. For example, how does headcount cost for 20 people to be hired in ICANN compare to the fees for hiring an expert pre-existing non-profit? Can a foundation be set up using ICANN in-house legal staff or must we go to outside counsel?  (Here I am thinking about questions that will be asked by members of the CSG constituencies.)

I will leave these to Sam and Xavier.



From: Alan Greenberg <alan.greenberg at mcgill.ca<mailto:alan.greenberg at mcgill.ca> >
Sent: Tuesday, November 19, 2019 12:51 PM
To: Aikman-Scalese, Anne <AAikman at lrrc.com<mailto:AAikman at lrrc.com>>; Erika Mann <erika at erikamann.com<mailto:erika at erikamann.com>>; Becky Burr < becky.burr at board.icann.org<mailto:becky.burr at board.icann.org>>
Cc: ccwg-auctionproceeds at icann.org<mailto:ccwg-auctionproceeds at icann.org>
Subject: Re: [Ccwg-auctionproceeds] Auction Proceeds Mechanism A - Internal Department at ICANN

I agree that we should make a simple statement that ICANN's accountability measures cannot be used in relation to Auction Proceeds grant requests (regardless of who might file them). This has nothing to do with the approval of annual budgets. If the EC decides that the tranch allocated in the budget is not appropriate, it can still take action under its powers. We are proposing nothing related to the powers of the EC itself.
I presume the Board will ultimately approve whatever it approves contingent on the Fundamental Bylaw change being approved by the EC. If the EC does not approve it, we are back to square one (or somewhere, but do not have an Auction Proceeds plan that is workable).
If there are auction proceeds from further rounds, AND the ICANN Board decides they go into te same post as we have now, fine. If there are no auction proceeds or if they are designated for something else. fine.
Regarding Bylaws 25.4, note that the lead-in words are "for avoidance of doubt". The earlier section of 25 explicitly call out the process which is led by the Board. We have already approved a fundamental Bylaw change and the process is understood (I speak as a former member of the EC Administration).
At 19/11/2019 01:31 PM, Aikman-Scalese, Anne wrote:
Erika, Becky, et al,

Proposed Final Report and Consensus

I believe there was CCWG consensus regarding the need for a Fundamental ByLaws change as to the unavailability of Request for Reconsideration (RFR) and Independent Review Panel (IRP) in relation to applicants vis-à -vis  the grant-making process.  Here, the CCWG makes a NEW recommendation on page 23 of the Proposed Final report in relation to remedies available to applicants for grants.  This recommendation does not cover the possibility of RFR and IRP that might be filed by someone other than an applicant and I believe that risk must be controlled as well.  (It’s possible persersons other than appliplicants could file an RFR or an IRP in relation to ICANN’s handling of the grantant-making process.)  Thee Proposed Final Report should likely also reflect that this requires a Fundamental ByLaws change requiring approval by 3/4 of the EC because public commenters need to know this.

In the limited tracking I have done prior to becoming the voting rep for the CSG Chartering organization, I don’t recall any specific discuscussions in relation to aa ByLaws amendment  relative to the powers of the Empowered Community established in the revisions to the ByLaws made in 2016 as a result of the Accountability Workstream 1 work.  Did the CCWG discuss these specific Empowered Community powers in relation to the Budget relative to use of Auction Proceeds?  Should the CCWG clarify that we are not recommending ByLaws changes in relation to EC powers? And if we do, does that make individual grants subject to EC powers (a result the CCWG does not want.)

To be specific, it does not appear to me from the Proposed Final Report that there has ever been a CCWG Consensus Recommendation in relation to (a)  availability of RFR and IRP to persons other than applicants for grants or (b) any effect on the EC powers memorialized in 2016 in relation to the use of Auction Proceeds funds.
I sincerely hope we can clarify that  the CCWG is not recommending that the Empowered Community give up the Accountability processes contained in the ByLaws in relation to Budgeting of funds obtained via Auction Proceeds.  In my view as an active member of Subsequent Procedures, this is a long term concern since the Sub Pro WG is quite likely to confirm that auctions will remain the mechanism of last resort in string contention far into the future.   While I understand that “ability toto Sunset†is important in relation to the prinnciple of not trying to establish a long term principal endowment, it does seem appropriate to consider that future new gTLD rounds were always intended and are likely to proceed at some point.  Thus, future auctions are likely to result in additional auction proceeds.

Again, in order to be crystal clear on page 23 of the Proposed Final Report, it would also be helpful if Samantha could clarify how specific ByLaws amendments can be proposed based on the CCWG recommendations.  The ByLaws seem to provide in Article 25 that this cannot be “dirirectly proposed”  by the CCWG iWG itself so I assume that what the CCWG recommends would need to then lead to a formulation by the Board of a specific ByLaws amendment.  See attached section 25.4.

Accordingly, in relation to the Proposed Final Report, I believe that the Recommendation (NEW) on page 23 should be reworked to clarify the CCWG Recommendations in relation to the needed ByLaws amendments.

Choice of Mechanism and Survey

Separately, in regard to the description of risk management I will need to provide to the CSG, I am trying to clarify whether it would be advisable (for the Board, ICANN org, the Community, and the grant recipients themselves)   to structure as follows:

(1) Fundamental ByLaws change to remove RFR and IRP from (a) remedies for applicants for the funds (b) remedies for anyone else who may have standing to file against ICANN decisions about Budgeting re use of funds inside the org and (b) ICANN decisions about how much to allot to grant-making in “tranches”.

(2) Preserve EC Powers as they stand in the ByLaws in relation to general Budgeting for both (a) the ICANN org use of the Auction Proceeds funds and (b) ICANN org budgeting of “tranches” f7; for grant-makimaking purposes.  EC powers as to the Budget process have a much higher threshold for challenging ICANN’â„¢s accountability than do RFR anFR and IRP.  A challenge is not easily mounted and a forum must be convened, etc, etc. But I don’t think nk anyone would want the EC powpowers to apply to any individual grant.  So it seems we need to choose a structure that keeps the “Budgdget” aspectpect of an overall line item for grants wwithin the EC Accountablity provisions but puts the individual grant-making outside the EC Accountablity powers.  (Perhaps I am wrong that individual grant-making could be subject to EC general powers if Mechanism A is utilized and if so, please advise.  I just don’t„¢t think the the CCWG actually has a Consensus on recommending a ByLaws change in relation to the EC accountability powers.)

(3) To preserve the EC powers as to Budget, it would seem “cleaner” to bsp; placelace the actual individual grant-making processes outside ICANN org and have the CCWG recommend and the EC acknowledge that specific individual grants are not subject to  the EC Budgeting powers if
(a) they are made by a pre-existing non-profit with expertise in grant-making working under the guidelines provided by the work of the CCWG and in accordance with the Board’s overversersight responsibilities and fiduciary duties.  (Mechanism B)
(b) or they are made by an ICANN Foundation formed with an independent Board of Directors similar to the manner in which PTI was formed with ICANN as the sole member of the corporation and thus well able to conduct oversight and fiduciary responsibilities.

I appreciate any observations other CCWG members may have that will help bring me up to speed.

Thank you,

Anne E. Aikman-Scalese
Of Counsel
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From: Erika Mann <erika at erikamann.com<mailto:erika at erikamann.com>>
Sent: Tuesday, November 19, 2019 7:52 AM
To: Becky Burr < becky.burr at board.icann.org<mailto:becky.burr at board.icann.org>>
Cc: Aikman-Scalese, Anne <AAikman at lrrc.com<mailto:AAikman at lrrc.com>>; ccwg-auctionproceeds at icann.org<mailto:ccwg-auctionproceeds at icann.org>
Subject: Re: [Ccwg-auctionproceeds] Auction Proceeds Mechanism A - Internal Department at ICANN

Becky - Thatâ€Ã¢„„¢s what we agre agreed upon but in the light of Anne’s ¢s points ra raised, we should evaluate whether our judgement will not be contestable.
Sent from my iPhone
On Nov 19, 2019, at 3:33 PM, Becky Burr < becky.burr at board.icann.org<mailto:becky.burr at board.icann.org>> wrote:

I think Sam is saying that Mechanisms A, B, and C would ALL require a fundamental bylaws change to eliminate the availability of IRP and Reconsideration with respect to individual grant awards.  I think we had strong consensus that decisions on individual grants should not be appealable using Reconsideration and IRP, and that a bylaws change should be pursued.  Inasmuch as the EC agreed to a fundamental bylaws change in Montreal, it seems all members have established the necessary processes.

Please correct me if I am wrong, Sam.


On Mon, Nov 18, 2019 at 5:20 PM Aikman-Scalese, Anne <AAikman at lrrc.com<mailto:AAikman at lrrc.com>> wrote:
Thank you Samantha.  I want to make sure I understand the implications for Accountability mechanisms and ByLaws amendments when presenting the options to the CSG.  As an initial matter,  could you please clarify one question as to Article 25.4 OTHER AMENDMENTS.  “Neither the EC, the Decisional Participants, , the S Supporting Organizations, the Advisory Committees nor any other entity or person shall have the power to directly propose amendments to these Bylaws”.  IIn this regard, I gather that the CCWG recommends and then the  Board itself will specifically propose a Fundamental ByLaws amendment in relation to Auction Proceeds.    Is that your understanding?

It seems a bit unlikely that the EC will want to give up its powers in relation to the Budgeting process as regards the use of Auction Proceeds for (a) use for grant-making purposes (regardless of the mechanism chosen) OR (b) internal use by ICANN Org in its own budget.  (Perhaps that is why there is a bullet point in Board comment relative to the cost of complying with Accountability mechanisms.  However, this cost is identified in that Board comment that now appears on page 10 of the Proposed Final Draft as a cost associated ONLY with Mechanism A.   The other mechanisms are listed in the Board input as requiring the further development of independent Accountability mechanisms so that is a bit confusing.)  However, overall Budgeting is of course different from the making of individual grants per se.  I think we definitely need to protect individual grants from being revoked by the EC.

Fundamental ByLaws Changes
It appears that eliminating Request for Reconsideration (RFR) and Independent Review Panel  (IRP) Accountability mechanisms would be a Fundamental ByLaws change requiring 3/4 approval from the Empowered Community members (some of whom may not have implemented EC processes yet?)  Can you confirm this? (Article 25).

Mechanism B
In Mechanism B, ICANN works with an outside contractor already set up for non-profit grant-making.  In that case, it would seem that although overall Budget allocation and tranches may still be subject to Empowered Community processes, individual grants made by the pre-existing expert  non-profit would not necessarily be subject to being revoked through an EC process.  In other words, working with a qualified expert grant-making organization could reduce risk, including the risk to recipients of grants.  (EC processes could theoretically be used to affect or influence the choice of the independent expert non-profit organization and the amount being allocated in any “tranche”.)

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