[NCUC-DISCUSS] ICANN Board Withholds Consent for a Change of Control of the Public Interest Registry (PIR) - ICANN

[Bruna Martins dos Santos]

Hey all,

I hope this email finds you well! Icann Board has just issued the following
statement on the PIR sale:

https://www.icann.org/news/blog/icann-board-withholds-consent-for-a-change-of-control-of-the-public-interest-registry-pir

Best,
Bruna


----

Today, the ICANN Board made the decision to reject the proposed change of
control and entity conversion request that Public Interest Registry (PIR)
submitted to ICANN.

After completing extensive due diligence, the ICANN Board finds that
withholding consent of the transfer of PIR from the Internet Society (ISOC)
to Ethos Capital is reasonable, and the right thing to do.

ICANN's role is to ensure the stable and secure operation of the Internet's
unique identifier systems. We are dedicated to making the right decision,
knowing that whatever we decide will be well received by some, and not by
others. It is our responsibility to weigh all factors from an ICANN Bylaws
and policies perspective, including considering the global public interest.
We have done this diligently, ensuring as much transparency as possible and
welcoming input from stakeholders throughout.

On 13 November 2019, PIR announced
<https://thenew.org/the-internet-society-public-interest-registry-a-new-era-of-opportunity/>
 that ISOC, its parent organization, had reached an agreement with Ethos
Capital, under which Ethos Capital would acquire PIR and all of its assets
from ISOC. Under the agreement, PIR would also be converted from a
Pennsylvania not-for-profit corporation to a for-profit Pennsylvania
limited liability company. ISOCcreated and agreed to the transaction
details that are under review.

On 14 November 2019, PIR formally submitted
<https://www.icann.org/en/system/files/correspondence/cimbolic-to-icann-14nov19-en.pdf>
to ICANN a "Notice of Indirect Change of Control and Entity Conversion" in
advance of closing the proposed transaction between Ethos Capital and ISOC.
Since 2003, PIR has operated the .ORG generic top-level domain (gTLD) as a
not-for-profit organization, as well as six other gTLDs. Per the gTLD Registry
Agreements
<https://newgtlds.icann.org/sites/default/files/agreements/agreement-approved-31jul17-en.html#article7.5>
, ICANN must either approve or withhold consent of a proposed change of
control, the deadline for which is 4 May 2020.

ICANN's role has been to evaluate the reasonableness of PIR's request for
indirect change of control and entity conversion. In doing so, ICANN evaluated
an extensive amount and variety of information related to the proposed
transaction, including details of the transaction structure, financing, and
other funding sources of Ethos Capital, the parties involved, the role of
the Pennsylvania authorities, information related to financial resources
and operational and technical capability, how the new for-profit PIR under
the control of Ethos Capital would be responsive to the needs of the
non-commercial community, what input the .ORG community had provided to PIR
or ISOC on the proposed transaction, and how that community input would be
reflected in the operations of PIR following its conversion.

Throughout this process, the ICANN Board has worked thoughtfully and
thoroughly to determine if it is reasonable under PIR's Registry Agreements
for ICANN to either approve or withhold consent to the proposed change of
control. Before making our determination, the Board, among other things:

   - Conducted thorough due diligence
   - Received and reviewed hundreds of pages of documentation and responses
   provided by PIR, ISOC and Ethos Capital following ICANN issuing three
   requests for more information
   - Was briefed extensively by ICANN org
   - Received and considered more than 30 letters from stakeholders
   - Considered input from an ICANN67 public forum, views of the community
   and others who weighed in after we received PIR's Public Interest
   Commitments
   - Considered the opinions expressed in the California Attorney General's
   Office letter sent to ICANN on 15 April 2020

The Board was presented with a unique and complex situation – impacting one
of the largest registries with more than 10.5 million domain names
registered. After completing its evaluation, the ICANN Board finds that the
public interest is better served in withholding consent as a result of
various factors that create unacceptable uncertainty over the future of the
third largest gTLD registry. Factors that were considered in determining
reasonableness include, but are not limited to:

   - A change from the fundamental public interest nature of PIR to an
   entity that is bound to serve the interests of its corporate stakeholders,
   and which has no meaningful plan to protect or serve the .ORG community.
   - ICANN is being asked to agree to contract with a wholly different form
   of entity; instead of maintaining its contract with the mission-based,
   not-for-profit that has responsibly operated the .ORG registry for nearly
   20 years, with the protections for its own community embedded in its
   mission and status as a not-for-profit entity.
   - The US$360 million debt instrument forces PIR to service that debt and
   provide returns to its shareholders, which raises further question about
   how the .ORG registrants will be protected or will benefit from this
   conversion. This is a fundamental change in financial position from a
   not-for-profit entity.
   - There are additional uncertainties, such as an untested Stewardship
   Council that might not be properly independent, or why PIR needs to change
   its corporate form to pursue new business initiatives.
   - The transaction as proposed relies on ICANN as a backstop for
   enforcement of disputes between the .ORG community and the registry
   operator in an untested manner.

The entire Board stands by this decision. After thorough due diligence and
robust discussion, we concluded that this is the right decision to take.
While recognizing the disappointment for some, we call upon all involved to
find a healthy way forward, with a keen eye to provide the best possible
support to the .ORG community.

The Board would like to thank the global community and stakeholders for
their engagement.

The resolution and rationale document, which expands upon this decision is
available, he
<https://www.icann.org/resources/board-material/resolutions-2020-04-30-en>
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