[CWG-Stewardship] Another alternative proposal - addressing some questions

[Greg Shatan]

Chris,

Please see below.

Greg



On Thu, Jan 22, 2015 at 11:52 PM, Chris Disspain <ceo at auda.org.au> wrote:

> Hi Greg,
>
> Thanks for your comments. My apologies for mischaracterising contract co
> as having ‘shareholders’. To your other comments and generally:
>
> Also, trusts are separate legal entities, so it is similar to Contract Co
> in that regard (and thus prey to many of the same "complexities.")
>
>
> A trust is not a legal entity. A trustee is a legal entity.
>

Chris:  I think there are nuances here that are beyond both of us (hence
the need for targeted legal expertise).  Here is an excerpt from the US
government website (www.usa.gov), describing trusts:

 Creating a trust (or trust fund) establishes a legal entity that holds
property or assets for the person who created it. The person who creates
the trust can be called a grantor, donor, or settlor. When the grantor
creates the trust he or she appoints a person or entity (like the trust
department of a bank) to manage the trust. This person or entity is called
a trustee. The grantor also chooses someone who will ultimately benefit
from the trust, this person is the beneficiary.

http://www.usa.gov/topics/money/personal-finance/trusts.shtml

Further research reveals apparently contradictory statements regarding the
legal and juristic standing of trusts, as well as instances in which trusts
are legal entities for certain purposes (e.g., tax) and not others (e.g.,
standing to sue).  I can only conclude that some real expertise in trust
law is needed to sort this out.

> It's my understanding that trusts are created to hold property.  Shouldn't
> the Trust (and not the Trustee) own the IANA function?  If the Trust
> doesn't hold the IANA Functions, what assets are held by the Trust?
>
>
> Because the trust is not a legal entity, the trustee holds the property
> for the benefit of the beneficiaries. The asset is the right to run the
> IANA function and that is what is held by the trustee.
>
> I'm not familiar with this "guardian" concept (unless it was created
> uniquely for this proposal).  Is this an Australian law concept?  Do you
> know if this is similar to the "trust protector" concept in the US?
>
>
> It’s not an Australina concept however the word may be different. It is
> used synonymously with protector, appointor, supervisor and the like.
>
> I believe this proposal simplifies the contract co proposal, by removing
> the creating of Contract Co. - the Contract Co. here is not “ICANN”. ICANN
> is performing the IANA naming functions, for the benefit of the “customers”
> of the IANA naming functions (who are the stated beneficiaries of the
> trust, replacing the need to create “Contract Co.”).
>

Just to confirm, the registries (and not the larger multistakeholder
community)  are the beneficiaries of the trust.  This has some downstream
consequences (see below).

>
>
> The Trustee also has higher fiduciary obligations, which require them to
> always act in the best interests of the beneficiaries (not just for
> themselves).
>

What if the interests of the beneficiaries (i.e., the registries) diverge
from the interests of the multistakeholder community generally or the
public interest?  Wouldn't that require the Trustee (i.e., ICANN) to act in
the registries' interest, even if it is to the detriment of other
stakeholders?  That seems at odds with the idea of accountability to
stakeholders, generally.  We would need to find a way to deal with this.

>
> The Trust can be “settled” by the NTIA passing on the “right to perform
> the IANA naming functions” to ICANN as the trustee. So, two parties: NTIA
> as settlor; ICANN as trustee.
>
> Trustee can always unilaterally declare a trust - but this would be a
> redundant question now in light of explanation above.
>
> The beneficiaries of the trust would be the “customers” of the IANA naming
> functions - as described in the ICG RF.
>
> The guardian is the “protector” of the beneficiaries. It can’t be the
> entire pool of beneficiaries, but it can be someone, or some group of
> people, who represents  the beneficiaries.
>
> All of the above is subject to confirmation by the relevant legal experts
> that this is workable under Californian law.
>

Thanks for the further explanation.  It is an interesting proposal, with
some issues (as others have as well).  I look forward to working through
it, getting the necessary legal advice, and seeing if this will work.

Greg

>
>
>
> Cheers,
>
>
> Chris
>
> On 23 Jan 2015, at 08:00 , Greg Shatan <gregshatanipc at gmail.com> wrote:
>
> Chris,
>
> A few quick comments, inline below:
>
> *Greg*
>
> On Thu, Jan 22, 2015 at 3:13 PM, Chris Disspain <ceo at auda.org.au> wrote:
>
>> Greetings All,
>>
>> Earlier today Paul Szyndler from auDA sent to RFP3 another alternative
>> proposal (attached).
>>
>> I have received a number of questions off list from some ccTLD colleagues
>> and others and thought it might be helpful to address them all in this
>> email to the CWG.
>>
>> 1. Are there legal issues with the Trust solution? I am not an expert in
>> Californian law but as a lawyer I do know a fair bit about trusts and their
>> structure. The proposal is workable in general terms but there may be
>> nuances of Californian law generally, or specifically as it applies to
>> Californian corporations like ICANN, which would make the proposed
>> structure overly complicated or problematic. Like the 'contract co’
>> proposal and auDA’s original ‘golden by-law’ proposal I expect this to be
>> put to independent legal experts who can advise on the merits of each of
>> the proposals.
>>
>
>> 2. Isn’t creating a trust just creating 'contract co' by another name?
>> No. My understanding of 'contract co’ is that it would be a separate legal
>> entity owned by some, yet to be identified, group of shareholders.
>>
>
> Chris:  This is not correct. The proposal was that Contract Co would be a
> not-for-profit corporation, which don't have shareholders (or any kind of
> owner).  Also, trusts are separate legal entities, so it is similar to
> Contract Co in that regard (and thus prey to many of the same
> "complexities.")
>
>
>> With the trust, ICANN would own the IANA function but declare in a
>> legally binding document that it did so on trust for the relevant
>> stakeholder community.
>>
>
> It's my understanding that trusts are created to hold property.  Shouldn't
> the Trust (and not the Trustee) own the IANA function?  If the Trust
> doesn't hold the IANA Functions, what assets are held by the Trust?
>
> And the Guardian of the Trust (see the proposal for details) would control
>> the process by which ICANN could be replaced as trustee in a defined set of
>> circumstances. This is thus an inherently ‘internal to ICANN’ approach.
>>
>
> I'm not familiar with this "guardian" concept (unless it was created
> uniquely for this proposal).  Is this an Australian law concept?  Do you
> know if this is similar to the "trust protector" concept in the US?
>
>>
>> 3. Why would ICANN be the trustee? In simple terms because auDA believes
>> in an 'internal to ICANN’ approach. We believe that ICANN should run IANA
>> but that there should be the ability to move the IANA function away in
>> certain defined circumstances. That is what this proposal (and our first
>> ‘golden by-law' proposal) achieve and that’s what differentiates them from
>> the ‘contract co’ proposal.
>>
>> I know I don’t need to say this but for the avoidance of doubt, this is
>> an auDA proposal. I have not discussed it with my fellow ICANN directors
>>
>> I will not be on the RFP3B call Friday as I’ll be somewhere mid-air
>> between Dubai and Melbourne. However, Paul Szyndler will be on the call and
>> will happily enter into any discussion on the proposal and answer (or
>> undertake to get answers to) any questions that may be raised.
>>
>> I hope this is helpful.
>>
>> Cheers,
>>
>
> Thanks,
>
> Greg
>
>>
>>
>> Chris Disspain | Chief Executive Officer
>>
>> .au Domain Administration Ltd
>>
>> T: +61 3 8341 4111 | F: +61 3 8341 4112
>>
>> E: ceo at auda.org.au | W: www.auda.org.au
>>
>> auDA – Australia’s Domain Name Administrator
>>
>>
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