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

Fri May 1 16:57:47 CEST 2020

>
> Anyhow, where does that leave us? Is PIR still up for grabs (and by whom?)
> Is the whole thing just over? Are Ethos/ISOC just going to redo thier
> homework and come back with another transaction proposal?

In a message to ISOC Chapters ISOC CEO Andrew Sullivan says

*ICANN has announced that it does not consent to the transaction. ICANN’s
decision effectively means that the transaction cannot, and will not,
proceed.*

*I am, of course, disappointed by ICANN’s decision. ICANN took much longer
than it should have to render its decision, and in my view, stretched
beyond its own agreements and the remit in its bylaws. I am also concerned
that ICANN has shown itself to be much more susceptible to political
pressure than its mandate would recommend. Nevertheless, I am grateful that
ICANN has now rendered a clear decision. This decision means that the
period of uncertainty is over. In the future, we will continue to rely on
our colleagues at PIR to provide exemplary registries in rigorous
compliance with their ICANN agreements, and to continue to provide generous
funding to the Internet Society. *

One would think that, if indeed "ICANN stretched beyond its own agreements
and the remit in its bylaws",  the Independent Review Process could be
invoked, as it was in the case of .xxx.

ISOC has said, during community calls, that if the deal fell through there
would be no further attempt to sell PIR.

Yet, something of an own goal for the PIR community, perhaps.  Ethos's
principle argument, one that nevertheless fell on deaf ears, was that the
PIR community would benefit from the transaction because PIR, rather than
existing primarily as a cash cow for ISOC, would have as its primary
interest investing in the PIR community, which, in turn, would increase the
value of the asset. The proposed Stewardship Council would have given the
PIR community more influence than the staus quo.

Meanwhile ICANN has shown that rather than uphold its role as an impartial
technical coordinator, it is controlled by political and emotional
influences, which well may come back to bite it.

Joly

On Thu, Apr 30, 2020 at 11:01 PM Raphael Beauregard-Lacroix <
rbeauregardlacroix at gmail.com> wrote:

> Hi all
>
> Thanks Bruna!
>
> This is particularly... euphemistic
>
>
>    - Considered the opinions expressed in the California Attorney
>    General's Office letter sent to ICANN on 15 April 2020
>
> "Opinions." More like threat to sue.
>
> Anyhow, where does that leave us? Is PIR still up for grabs (and by whom?)
> Is the whole thing just over? Are Ethos/ISOC just going to redo thier
> homework and come back with another transaction proposal?
>
> Have a nice day,
>
> On Thu, Apr 30, 2020 at 10:50 PM Bruna Martins dos Santos <
> bruna.mrtns at gmail.com> wrote:
>
>> 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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