Accountability and Transition in ICANN’s New gTLD Program

Dechert LLP

Dechert LLP

Bringing accountability to the Internet Corporation for Assigned Names and Numbers (ICANN), the little known yet hugely significant global regulator of the Internet domain name system, is always a significant victory. ICANN is currently expanding new top level domain names (TLDs) beyond familiar TLDs such as .com and .edu to hundreds of new domain names under the new gTLD Program. These TLDs involve high-profile public interests and are valuable resources, with companies competing to pay tens of millions of dollars at auction to win the right to operate them.

To date, ICANN has collected more than US$240 million from auctioning new gTLDs. Yet ICANN insists in handling the assignment of TLDs in a single-handed and secretive manner. The process of seeking recourse against ICANN’s decisions has seemed a long-shot to many applicants. Of the 18 Independent Review Process (IRP) proceedings brought to date to hold ICANN accountable for its actions, only three claimants have succeeded: ICM Registry (.XXX), DCA Trust (.AFRICA), and most recently Dot Registry (.LLC, .INC and .LLP). All three were represented by Dechert lawyers. The Final Declaration in Dot Registry LLC v ICANN, added a new dimension to ICANN’s accountability: ICANN cannot avoid its responsibilities by contracting with a third party to perform ICANN’s obligations. The Panel majority’s thorough analysis of ICANN’s internal accountability mechanisms revealed ICANN’s profound lack of transparency and due diligence.

ICANN’s Background and Recent Developments

ICANN is a non-profit public benefit corporation organized under the laws of the State of California. ICANN operates under a contract from the United States Department of Commerce, and remains organized on a multi-stakeholder governance model. ICANN’s Articles of Incorporation and Bylaws set out the principles and rules by which ICANN is required to operate, including that ICANN must “operate for the benefit of the Internet community as a whole” in recognition of the fact that “the Internet is an international network of networks, owned by no single nation, individual or organization”. ICANN’s Bylaws contain independent directives protecting openness, transparency and procedural fairness as ICANN’s “Core Values”. ICANN’s actions are governed by international law. ICANN’s Bylaws also provide for internal and external accountability mechanisms to evaluate the decisions of ICANN’s Board, staff and external contractors in light of ICANN’s global mandate and responsibility. The ultimate recourse for any complainant is to initiate an external accountability mechanism called an Independent Review Process (IRP), similar to an international arbitration, where disputes are heard by a Panel of independent arbitrators and administered by the International Center for Dispute Resolution (ICDR), the international arm of the American Arbitration Association. Although disputed by ICANN, the decisions are binding on ICANN. ICANN is currently in the news as it controversially seeks to sever its contractual relationship with the U.S. Government and fully transition to independent stewardship of its core functions. Although disputed by ICANN, the decisions are binding on ICANN.

The Facts in the Dot Registry Case

With the support of individual Secretaries of State and the National Association of the Secretaries of State, Dot Registry applied to ICANN for the TLDs .INC, .LLC and .LLP. In its applications, Dot Registry made commitments to operate the registries for these sensitive TLDs with verification mechanisms in place to protect against abuse and limit registrants to legally registered U.S. entities. Qualified community-based applicants that satisfy a set of criteria established by ICANN, like Dot Registry, are entitled to priority over competing applicants for TLDs; if community priority is not granted, a community applicant, like standard applicants, must try to resolve the contention with its competitors, with the last resort being an ICANN facilitated auction in which the TLD is awarded to the applicant who places the highest bid. ICANN assigned the evaluation of community applicants to a third party contractor, the Economist Intelligence Unit (EIU). In the course of rejecting Dot Registry’s applications, the EIU misapplied the relevant standards, failed to act independently, did not conduct due diligence and discriminated against Dot Registry’s applications.

After Dot Registry exhausted ICANN’s internal accountability mechanisms, Dot Registry initiated an IRP. The issues for the IRP Panel were (i) whether the EIU and ICANN Staff are bound by ICANN’s Articles of Incorporation and Bylaws and (ii) whether ICANN (including its staff and affiliated parties, such as the EIU) had, in fact, complied with ICANN’s Articles of Incorporation, Bylaws and gTLD Applicant Guidebook in its treatment of Dot Registry’s applications.

The Independent Panel’s Ruling

By a majority of 2-1 the IRP Panel, held that ICANN’s Board, staff and external contractors were subject to the principles set-out in ICANN’s Articles of Incorporation and Bylaws. The majority of the Panel also rejected ICANN’s submissions that the Panel had to apply a deferential standard to evaluate ICANN’s actions, instead conducting a direct examination of ICANN’s actions. The majority specifically found that the “principles of fairness, transparency, avoiding potential conflicts of interest, and non-discrimination” embodied in the Articles of Incorporation and Bylaws extended to not only to ICANN’s Board, but the Board’s subcommittees, ICANN staff and the EIU. The decision is important because of its holding that ICANN staff and third-party contractors are also subject to the obligations set forth in ICANN’s governing documents.

Turning to the specifics of Dot Registry’s complaints, the majority accepted Dot Registry’s submission that ICANN’s internal accountability process amounted to merely a “rubber stamp", pointedly noting that ICANN’s Board Governance Committee (BGC) not only had the obligation to conduct a meaningful review but the tools to do so. Further, the Panel took note of the fact that all the communications between the BGC and ICANN staff went in one direction, with the BGC choosing not to ask any questions or seemingly make any changes to ICANN staff’s prepared decisions. The Panel then went on to consider Dot Registry’s submissions on the absence of any evidence of due diligence, transparency and independent judgment, ultimately accepting all of Dot Registry’s contentions that ICANN had failed to comply with these requirements. The Panel also set out in detail the evidence demonstrating ICANN’s staff’s constant supervision of and interference in the work of the supposedly independent evaluator, the EIU. In short, the majority found that ICANN had failed to uphold the values enshrined in its own Bylaws in the treatment of Dot Registry’s applications. ICANN’s appointed arbitrator dissented.

Future Implications

The Declaration will have far reaching implications for the future of internet governance as whole, and will serve as a powerful precedent for holding ICANN’s Board, staff and third party contractors accountable. It clearly directs the ICANN Board to undertake reforms of ICANN’s internal accountability process, criticized by the Panel as a “rubber stamp”. ICANN’s Board will also have to consider carefully the implications of the Panel’s finding that decisions to delegate community TLDs are not actually being made by an independent expert, as applicants expected, but that ICANN staff are intimately involved in the process and ICANN clearly retains final control over whether or not to grant community status to particular TLDs. It is notable that ICANN has already enacted reforms to strengthen its accountability mechanisms, though many feel such reforms do not go far enough and ICANN continues to limit oversight and accountability, for example by creating a deferential standard of scrutiny under the business judgment rule. In short, as ICANN proceeds with the IANA transition, reform and restoring trust and confidence in ICANN remains indispensable.


As with the .XXX and .AFRICA IRPs, in which Arif Ali, co-chair of Dechert’s International Arbitration Group, was also the lead counsel and members of the Dechert ICANN team played prominent roles, the importance of the Dot Registry Panel's decision lies in its recognition that ICANN, as the regulator of the Internet, a global resource, must be held accountable for its actions. Today, ICANN is pressing for the privilege to oversee Internet governance without oversight by the U.S. or any government. This privilege comes with immense responsibility and requires accountability. As ICANN enters into the next phase of its transition away from U.S. government oversight, the global internet community will be watching to see whether ICANN undertakes much needed reforms.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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