[CWG-Stewardship] On "Entity" and incorporation - key questions to frame our discussion

[Greg Shatan]

Bertrand:

I think these questions have been asked and answered several times
(including by me in  a response to an earlier email), but I"ll do it
again.  Responses inline.

On Mon, Dec 1, 2014 at 11:10 AM, Bertrand de La Chapelle <
bdelachapelle at gmail.com> wrote:

> Dear Greg, dear all,
>
> Two things: 1) a comment on the notion of "entity" and 2) a few key
> questions that I would like to see clearly answered to move forward
>
> *1) ON THE NOTION OF "ENTITY" AND COMMON UNDERSTANDING*
>
> In your exchange below with Holly, you mentioned two definitions of the
> term "entity". She rightly pointed there were of two types: one from a
> legal perspective and another one a more general, layman's perspective.
>
> Naturally, the first one (the legal one) focuses on incorporation, with
> mentions such as "separate existence for tax purposes".
>
> The second one, however, from the Merriam-Webster was more generic:
>
> *1 a :  being <http://www.merriam-webster.com/dictionary/being>, existence
> <http://www.merriam-webster.com/dictionary/existence>; especially :
> independent, separate, or self-contained existence*
> *b :  the existence of a thing as contrasted with its attributes*
> *2:  something that has separate and distinct existence and objective or
> conceptual reality*
> *3:  an organization (as a business or governmental unit) that has an
> identity separate from those of its members*
>
>
> I have a simple question: is the IETF an "entity" acccording to that
> definition, although it is not incorporated? I believe the answer is yes.
>

GS: It is not an entity for the purpose of entering into contracts.  ISOC
(which is a legal entity) enters into contracts.  (IETF is an "organized
activity" of ISOC.)

>
> As you know, the W3C, at least for a long period of time, was not
> incorporated, relying on three separate MoUs with "host" structures. (It
> may have changed since then but that was the case for several years). Isn't
> the W3C an "entity" for the purpose of the discussion we're having?
>

GS:  No.  W3C is not an entity for the purpose of discussions regarding
entering into contracts.  W3C is a contractual entity, created by a Joint
Agreement between the host institutions.  W3C members enter into a Member
Agreement signed by all 4 host institutions.

>
> Likewise, aren't the gNSO and the ccNSO, "organizations" (it is in their
> name) that have "an identity separate from those of (their) members", and
> "something that has a separate and distinct existence and objective or
> conceptual reality", and a "self-contained existence"? And therefore
> "entities" in light of the MW definition above?
>

GS: They may be entities for some purposes, but not for the purpose of
entering into contracts.  To the extent they are entities, that is
irrelevant to the discussion at hand.

>
> You may have had a legal meaning in mind for the term "entity" because of
> your own background but it seems clear that in Frankfurt, several people
> clearly understood the word in its more general meaning.
>

GS:  I believe this has since been clarified.

>
> *2) KEY QUESTIONS*
>
> In my view, the core of the discussion here can be summarized as follows:
>
> 1) *Is incorporation required to "contract"?* Given that the IETF seems
> to have an MoU with ICANN (among other arrangements with other "entities"),
> I would suppose that the answer is no. Can someone clarify this important
> point?
>

GS:  As pointed out before, ISOC is the signatory of the ICANN MoU.  So the
answer to your question is *YES, YES, A THOUSAND TIMES YES.*

>
> 2) If the answer above is indeed no, is there any practical, legal or
> other constraint that would *expressly forbid IETF, the NRO (or ASO), the
> ccNSO and the gNSO to have each an MoU* with ICANN or any other
> contractor for the IANA functions?
>

GS:  The answer above is yes, so no need to go further.  (I will also state
again for the record that an MoU is a contract, and has to follow all the
rules applicable to contracts in general.)

>
> 3) If the answer to 2) above is no, what are *the pros and cons to
> establishing instead a specific contracting Corporation*, in terms of
> simplicity, compatibility between the mechanisms for the different groups
> (parameters, numbers, names), guarantee of accountability, stability and
> security of the system.
>

GS: The answer to 2) is either "yes" or "not applicable," so no need to go
further.

>
> Unless these questions are clearly answered, I am afraid we will be
> running in circles and losing time.
>

GS:  I am afraid that a number of people seem to insist on running in
circles.  I have been spending quite some time trying to whack them back on
track.  I do not think that the group as a whole is running in this circle,
or losing time, just a few people who desperately want to find something
that doesn't exist. If it did, don't you think I would be the first person
to bring it up?

I hope that these questions are now clearly and definitively answered.

Greg

>
> Thanks for the feedback.
>
> Best
>
> Bertrand
>
>
>
> "*Le plus beau métier des hommes, c'est d'unir les hommes*", Antoine de
> Saint Exupéry
> ("*There is no greater mission for humans than uniting humans*")BERTRAND
> DE LA CHAPELLEInternet & Jurisdiction Project | Director
>
> On Sun, Nov 30, 2014 at 7:42 AM, Greg Shatan <gregshatanipc at gmail.com>
> wrote:
>
>> Holly and all:
>>
>> If we are turning to the dictionary, please consider the following:
>>
>> Entity
>>
>> *A real being; existence. An organization or being that possesses
>> separate existence for tax purposes. Examples would be corporations,
>> partnerships, estates, and trusts. The accounting entity for which
>> accounting statements are prepared may not be the same as the entity
>> defined by law.*
>>
>> Entity *includes corporation and foreign corporation; not-for-profit
>> corporation; profit and not for-profit unincorporated association;* Business
>> Trust <http://legal-dictionary.thefreedictionary.com/Business+Trust>, *estate,
>> partnership, trust, and two or more persons having a joint or common
>> economic interest; and state, U.S., and foreign governments.*
>>
>> *An existence apart, such as a corporation in relation to its
>> stockholders.*
>>
>> *Entity includes person, estate, trust, governmental unit.*
>> West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale
>> Group, Inc. All rights reserved.
>>
>> This is what I mean when I say "entity."  I'll try to say "legal entity"
>> to avoid any doubt in future.  But there was no doubt in my mind (or many
>> others) that when we were talking about creating an entity -- and in
>> particular, an entity that could enter into a contract -- that this is what
>> we were talking about.
>>
>> For what it's worth, the Merriam-Webster's definition that I found first
>> when searching the Internet is as follows:
>>
>> 1* a* *:*  being <http://www.merriam-webster.com/dictionary/being>,
>> existence <http://www.merriam-webster.com/dictionary/existence>;
>> *especially* *:*  independent, separate, or self-contained existence
>> *b* *:*  the existence of a thing as contrasted with its attributes
>> 2*:*  something that has separate and distinct existence and objective
>> or conceptual reality
>> 3*:*  an organization (as a business or governmental unit) that has an
>> identity separate from those of its members
>>
>> Greg
>>
>> On Sat, Nov 29, 2014 at 11:16 PM, Holly Raiche <h.raiche at internode.on.net
>> > wrote:
>>
>>> Thank you Alan for the time and thought you have put into this.  My
>>> comments, for what they are worth, interspersed.
>>>
>>> Holly
>>>
>>> On 29 Nov 2014, at 4:23 pm, Alan Greenberg <alan.greenberg at mcgill.ca>
>>> wrote:
>>>
>>>  As I have mentioned during the F2F meeting in Frankfurt and on the most
>>> recent teleconference, I have significant problems with the proposal
>>> currently on the table. I am taking this opportunity to present my concerns
>>> in somewhat more detail, and I will also present what I believe to be a
>>> viable alternative. The ideas presented are my own, but I do know that they
>>> are largely shared by my At-Large colleagues and by some others in the
>>> community.
>>>
>>> I am also quite aware that my alternative options are likely to be
>>> vehemently opposed by some.
>>>
>>> I should also add that there are aspects of the current draft CWG
>>> proposal that I strongly support. The Independent Appeals Panel is perhaps
>>> the most important one.
>>>
>>>
>>>
>>> *Overview *Many of my concerns are due to the large number of "details"
>>> that are, as yet, unspecified. Perhaps some of my concerns will be negated
>>> once there are sufficient answers, but I have the nagging feeling that for
>>> many, there will be no viable answer. This message will necessarily be long
>>> - my apologies for that.
>>>
>>>
>>>
>>> *Contract Co. *Many of the issues surround the "entity" (as it was
>>> referred to in Frankfurt).
>>>
>>>
>>> First - using a Webster’s Dictionary (for the many Americans commenting)
>>> entity is defined as a ‘thing which has reality and distinctness’.  NB: It
>>> does NOT NECESSARILY imply any corporate status.  So there was a big and
>>> surprising leap from entity - which many of us supported - to some kind of
>>> corporate structure - which seems to have become a done deal in the minds
>>> of some. However, if it ‘signs a contract’, it necessarily has some legal
>>> status. And the tasks given below suggest it should. Is it too late to ask
>>> whether it is possible to have the PRT without a contract company.
>>>
>>> The draft somewhat glibly says that it will only sign the contract. But
>>> it seems to be outsourcing much of its responsibility to the
>>> Multistakeholder Periodic Review Team (PRT), and that seems problematic.
>>> Perhaps the intent is not that all of these things go to the PRT, but there
>>> does not seem to be anywhere else for the functions to go. Among the tasks
>>> that it has outsourced are consultation regarding the contents of future
>>> RFPs, RFP issuance, RFP evaluation, contract negotiation and contract
>>> enforcement. What it cannot outsource is addressing legal issues such as
>>> being sued by a bidder who failed for win the contract and other such
>>> possibilities. Whether it is possible to have such an empty company do all
>>> this remains to be demonstrated. I will deal with problems with this
>>> outsourcing under the PRT.
>>>
>>> The jurisdiction under which the company is registered has been the
>>> subject of some discussion. Clearly there are those who feel that under no
>>> conditions can it be the US. At the same time, there are some indications
>>> (such as terms in the Kelly bill) that imply that the US Government may not
>>> be willing to accept anything other than the US. Note that I understand
>>> that the Kelly bill itself may wither and die, but to quote Milton Meuller,
>>> "We should also pay attention to it because the bill provides a very good
>>> benchmark for preparing for the kind of questions that the NTIA is likely
>>> to be asked after they get a complete proposal from the ICG and begin to
>>> implement it. The Kelly bill can be considered a list of the concerns that
>>> US-based interests are going to be using to assess the final proposal. The
>>> GAO Report is equally important in this regard. Ignore them at your peril."
>>> (E-mail to the CWG-Stewardship list on 23 Nov 2014)
>>>
>>> Without details of exactly how this corporation will exist, it is
>>> impossible to assure oneself that it cannot be captured or controlled by
>>> some entity or government(s). Running IANA will be a treasured target by
>>> some countries and we do not know what lengths they would go to capture the
>>> contract. NTIA had the strength of the US (and its battleships and such)
>>> behind it. Contract Co. will not.
>>>
>>> There has been no discussion about how this entity, or any part of the
>>> overall proposal, is funded. More on this later.
>>>
>>>
>>> *Multistakeholder Periodic Review Team (PRT)*
>>>
>>>
>>>
>>> The PRT is effectively the operational arm of Contract Co. It is the
>>> entity that makes decision for Contract Co., presumably including those
>>> related to the RFP, contract negotiations, contract enforcement and much
>>> more. But by its very name, it is Periodic. It does not exist at all times
>>> and there are some in the community that have said it should be
>>> re-constituted afresh every time it is needed (perhaps like the Phoenix
>>> born from the ashes of its predecessor). I fail to understand to how it can
>>> take action on problems if it is not an ongoing entity.
>>>
>>> The description says that it is a "body" with representatives selected
>>> by the relevant bodies. Accepting that "relevant" is to be decided later,
>>> it is unclear under whose auspices this body is convened, and how we can
>>> ensure that it remains free from capture or malformation. It was suggested
>>> in Frankfurt that this body could be akin to (or even identical to) the
>>> IANA-CWG, but given that the entire concept of this elaborate
>>> infrastructure is to allow ICANN to be completely excluded from the IANA
>>> management process, presumably because it has ceased to carry out this
>>> function as well as all parties claim it is now doing, what makes us think
>>> that ICANN would take responsibility for this, or more to the point, could
>>> be trusted to do it properly?
>>>
>>> The idea behind talking about an entity rather than a corporate
>>> structure was to suggest that it is possible to have structures with
>>> functions, without those structures have an individual corporate
>>> personality.  ALAC, GNSO,ccNSO, SSAC are all examples of entities that have
>>> an ongoing existence, functions, etc but do not have separate corporate
>>> identities.  It can be done - indeed, is being done.
>>>
>>>
>>> So how this body, which is the critical keystone [
>>> http://en.wikipedia.org/wiki/Keystone_(architecture)] on which this
>>> entire superstructure depends, constituted, and funded. And how does one
>>> ensure that it is not corrupted, or captured? Or sued.
>>>
>>> This was always my concern with creating a new corporate structure.
>>>
>>> A body as large as it will have to be will require infrastructure such
>>> as a secretariat - how do we ensure that IT is not subverted (just look at
>>> all the effort that has gone into ensuring an independent ICG secretariat)?
>>> And without a corporate backing of the PRT, its members would be personally
>>> liable in the case of a lawsuit. Who would want to serve on such a group?
>>> Moreover, in an environment where the PRT is taking very significant
>>> decisions, both financial offers and personal threats would be an effective
>>> method of capture (and presumably this is all volunteer work, or at most a
>>> modest stipend).
>>>
>>> For my money, these are critical questions - which remain unanswered.
>>>
>>>
>>> Surely, the PRT, which is implicitly all powerful, would need a new
>>> oversight mechanism over it! And who oversees THAT oversight body?
>>>
>>> EXACTLY - but the same can be said of the Contract Company.  Who funds
>>> it, who monitors it. And do we not then wind up with accountability issues
>>> for ICANN AND its oversight body.
>>>
>>>
>>>
>>>
>>> *Customer Standing Panel (CSC) *It is unclear exactly what this body
>>> monitors. If it is JUST service levels committed to by IANA, the
>>> composition may be ok. But if it is also responsible for ensuring that IANA
>>> is following policy, then the composition MUST reflect the
>>> multi-stakeholder body or bodies that created such policy. You cannot
>>> presume that the customers, who may have been vehemently opposed to any
>>> specific policy, will report that such a policy is not being policy. If the
>>> CSC is NOT monitoring adherence to policy, then who is? It does not seem to
>>> be covered in the proposal. During e-mail discussions, someone said it was
>>> the job of the (for the gTLD space) GNSO. But it does not have the staff or
>>> Bylaw mandate to do so, nor would it have any standing to complain to
>>> whoever it is that would attempt enforcement (the PRT??).
>>>
>>> Absolutely agree.  I think the problem with the concept is the word
>>> ‘customer’; it does not encompass all those who are impacted by IANA/ICANN
>>> decisions.  And agree with the comment abut the GNSO.
>>>
>>>
>>> There is reference to Liaison from ACs and SOs on the CSC. In the ICANN
>>> context, a Liaison has no power other than that of persuasion. They have no
>>> power to act if they are in disagreement with the majority of the full
>>> members.
>>>
>>> Which is why a Standing Panel based on the MSM is the better model.
>>>
>>>
>>>
>>>
>>> *Cost *Cost has been mentioned briefly above, but it is a significant
>>> issue. Aside from the costs of the infrastructure we are discussing here,
>>> there is the cost of IANA. Currently this is funded by ICANN. If ICANN were
>>> to be taken out of the picture (and the possibility of doing that is the
>>> ONLY reason for building all of this), where does the funding come from?
>>> From ICANN, out of the goodness of its heart, despite no longer having ANY
>>> control over how much money is demanded or how it is spent? By the gTLD
>>> registries, who have said they would likely fund THEIR part of the costs,
>>> but not the entire thing. By the ccTLDs who have clearly said we should not
>>> depend on them (with a few exceptions)?
>>>
>>> WELL SAID
>>>
>>>
>>>
>>>
>>> *Acceptability *The last time I heard Larry Strickling talk about the
>>> stewardship transition, he said it would only take place if sufficient
>>> controls were put in place to address ICANN messing up (i.e., in the
>>> extreme, a rogue Board). That PRESUMES that it is ICANN at the centre of
>>> the IANA stewardship - why else would we care about ICANN accountability if
>>> ICANN were not involved. From that, my take is they envision the IANA
>>> responsibility being transferred to ICANN. The Kelly bill clearly presumes
>>> this as well - why else would it be attempting to put so many constraints
>>> on ICANN?
>>>
>>> Again, well said
>>>
>>>
>>> It is not at all clear that a proposal such as one that the CWG has put
>>> in this draft would be acceptable to the US government.
>>>
>>> I don’t think it would be either.
>>>
>>>
>>> It will certainly not be a favoured proposal from the point of view of
>>> the ICANN Board (who may not have a direct say in this but cannot be
>>> totally ignored either).
>>>
>>>
>>>
>>> *Integratability *The ICG will be tasked with integrating the CWG
>>> proposal with that of the RIRs and the IETF. Although this is clearly their
>>> job and not ours, I have always believed that one needs to look ahead to
>>> ensure that there are no impassable roadblocks ahead.
>>>
>>> We do not definitively know what those proposals will be, but
>>> indications are emerging. Both bodies seem to be happy with how ICANN is
>>> managing IANA, but both feel that in the event of any untoward action, they
>>> could move the responsibility associated with their areas somewhere else.
>>> Since in both cases, it is the same body that sets the policy that would
>>> judge it, no great complexity is involved. In ICANN's case, since the
>>> bodies that set policy in the names space are (to a large extent) an
>>> integral part of ICANN, they cannot take action against their "parent" (so
>>> to speak). Thus this cumbersome alternative.
>>>
>>> Integrating these two approaches may be difficult.
>>>
>>>
>>>
>>> *Lost Opportunity *Part of the IANA Stewardship Transition is to put in
>>> place suitable ICANN accountability and governance changes so as to ensure
>>> the continuity of the IANA function.
>>>
>>> If all of the questions posed here, and the ones raised by others are
>>> addressed, we would end up moving from a situation where an entity (the
>>> NTIA of the US government) awards the IANA contract. The contract is
>>> currently held by ICANN but in theory at some future date, it could be
>>> awarded to some other organization, removing ICANN from any operational
>>> connection to ICANN.
>>>
>>> The new situation would be where Contract Co. awards the IANA contract.
>>> The contract will initially be held by ICANN but in theory at some future
>>> date, it could be awarded to some other organization, removing ICANN from
>>> any operational connection to ICANN.
>>>
>>> Notice the parallel wording. ICANN really has no motivation to change to
>>> effect this change. And in all likelihood any change associated with this
>>> transition will be minimal.
>>>
>>> If we go down the path of the current draft CWG proposal, I believe that
>>> a major opportunity will have been lost to reform ICANN.
>>>
>>>
>>>
>>> *Alternative *Simply criticizing the current CWG draft proposal is not
>>> particularly useful without alternatives. My alternative is certain to not
>>> please some of the parties in this discussion, but I believe that it is
>>> both possible and viable.
>>>
>>> All of the complexity of the CWG draft proposal is there to cover the
>>> eventuality that ICANN suddenly or gracefully stops performing the IANA
>>> function to the satisfaction of the community. That was indeed the
>>> situation a number of years ago, and ICANN took effective action to rectify
>>> the problems (that is, the NTI did not have to yank the contract to fix the
>>> problems). At the moment all parties seem to agree that there are no
>>> significant outstanding major problems, certainly none that could justify a
>>> change in the status quo. But there is a recurrent fear of "what if". What
>>> if ICANN had the IANA responsibility in perpetuity and stopped caring. Or
>>> had a Board that deliberately and without community support took action or
>>> inaction to harm how the IANA functions are carried out (the "rogue Board
>>> scenario).
>>>
>>> These worst case alternatives are indeed possible. And since under the
>>> current ICANN Bylaws, the Board is effectively sovereign, little could be
>>> done short of changing the Board over a period of 3+ years.
>>>
>>> And this is what worries Larry Strickling - what he said publicly at the
>>> last ICANN meeting.  He does want a credible answer that will satisfy his
>>> masters (including Congress)
>>>
>>>
>>> I suggest that there are ways to alter ICANN's Bylaws to allow the
>>> effective control of an out-of-control Board. These mechanisms will not be
>>> particularly appreciated by the ICANN Board, but I believe that such
>>> measures (or something similar) would be adopted if that is what is
>>> required to be granted IANA.
>>>
>>> There are a number of components that I will describe. They are not
>>> necessarily a complete or even the correct set. Putting in place a complete
>>> set of cohesive recommendations is what the Accountability CCWG is being
>>> convened for. But the existence of the following as a starting point, I
>>> believe, demonstrates that there IS a way to proceed forward.
>>>
>>> -       ACs and SOs must be given the ability to recall their sitting
>>> Board member. There will be no need to await the end of the current 3-year
>>> term.
>>> -       Certain classes of decision regarding IANA can only be made
>>> with (for an example) a supermajority (2/3) of the Board's maximum
>>> Bylaw-mandated membership approving the decision. Without the bulk of the
>>> AC/SO Board members, there will not be a critical mass of Board members to
>>> take such a decision.
>>> -       Certain classes of decision regarding IANA may only be made
>>> after notification period and public comment. This would allow the ACs and
>>> SOs sufficient time to act to recall their Board members
>>> -       It is possible that the composition of the Board might need to
>>> be slightly altered to ensure that a recall of most but not all AC/SO Board
>>> members would be effective in halting action. Or a higher threshold than
>>> supermajority might be needed.
>>> -       Bylaws regarding GAC advice related to IANA might need to
>>> somewhat altered to compensate for the GAC not having sitting Board members.
>>> -       Similarly, non-affiliated ccTLDs would need to be worked into
>>> the equation.
>>> -       If allowed under California law, the Bylaws could be require
>>> that under certain circumstances, a Board decision could be appealed to an
>>> external body (similar to the proposal's Independent Appeal for IANA
>>> decisions) and that the decision would be binding and enforceable in courts.
>>>
>>> I don’t think this is the entire answer BUT it goes a long way towards a
>>> workable response that can dovetail nicely with what both the numbers and
>>> protocols community are coming up with.
>>>
>>> Again, that you Alan - this is a really good summary of both concerns
>>> and a very positive way forward.
>>>
>>>
>>>  _______________________________________________
>>> CWG-Stewardship mailing list
>>> CWG-Stewardship at icann.org
>>> https://mm.icann.org/mailman/listinfo/cwg-stewardship
>>>
>>>
>>>
>>> _______________________________________________
>>> CWG-Stewardship mailing list
>>> CWG-Stewardship at icann.org
>>> https://mm.icann.org/mailman/listinfo/cwg-stewardship
>>>
>>>
>>
>>
>> --
>>
>> *Gregory S. Shatan **ï* *Abelman Frayne & Schwab*
>>
>> *666 Third Avenue **ï** New York, NY 10017-5621*
>>
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>>
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>>
>> *gsshatan at lawabel.com <gsshatan at lawabel.com>*
>>
>> *ICANN-related: gregshatanipc at gmail.com <gregshatanipc at gmail.com> *
>>
>> *www.lawabel.com <http://www.lawabel.com/>*
>>
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>>
>


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