Dear Colleagues, During the co-chair lawyer call last week, Rosemary raised a concern regarding whether requirements of 2/3 majority within the Board could be legally imposed. Since Icann Bylaws have such provisions today, it was decided that Rosemary would reach out to Jones Day to understand any prior legal analysis conducted by Icann on the matter. Below is a report on these discussions from Rosemary, which clarifies how this requirement can be legally imposed. Apart from mentioning this memo in the list of certified requests, we do not foresee any specific action as a follow up. Best Mathieu De : Rosemary E. Fei [mailto:rfei@adlercolvin.com] Envoyé : mercredi 13 janvier 2016 23:49 À : Mathieu Weill (Mathieu.Weill@afnic.fr); Thomas Rickert; León Felipe Sánchez Ambía (leonfelipe@sanchez.mx) Cc : ACCT-Staff (acct-staff@icann.org); Sidley ICANN CCWG (sidleyicannccwg@sidley.com); ICANN-Adler; Kevin B Espinola (kbespinola@jonesday.com) Objet : GAC advice and Board override issue Dear Co-Chairs, We spoke to Kevin Espinola at Jones Day earlier this week to discuss the current provisions in ICANN Bylaws that provide that a 2/3 Board vote is necessary to override certain advice from the GNSO and ccNSO consistent with the Boards governance role and individual directors fiduciary duties under California nonprofit corporate law. As we discussed with you in our Friday call, we were interested in any legal analysis relating to these provisions that might also apply to the proposed requirement for a 2/3 Board vote to override consensus GAC advice. While Kevin was not aware of any pre-existing legal analysis to share, based on factual information he provided, we have now concluded that such a requirement can be legally imposed. As you noted in our call on Friday, the proposed GAC override requirement has precedent in the current Bylaws: namely, under Annexes A and B, PDP recommendations approved by a supermajority vote of the GNSO and ccNSO, respectively, are required to be implemented unless the Board determines by a 2/3 vote that the policy is not in the best interests of ICANN or the ICANN community. We asked Kevin if we could review any legal analysis by Jones Day from when ICANN initially adopted these provisions; Kevin indicated that he was not aware of any, but agreed to search Jones Day files. While Kevin acknowledged that there could be a risk that the proposed provision would be invalid, he said he was comfortable with it in light of (1) the longstanding, unchallenged practice under the GNSO and ccNSO provisions cited above, and (2) the special nature of the GAC and its members, who are appointed by their governments for their diplomatic and Internet expertise. Under the California Corporations Code, in fulfilling their fiduciary duties, directors may delegate to, and rely on, a committee composed of experts on matters within their expert competence, so long as the directors act in good faith, after reasonable inquiry when the need is indicated by the circumstances, and without knowledge that would cause the reliance to be unwarranted. (CA Nonprofit Public Benefit Corp. Code Section 5231(b)(3).) Accordingly, since we understand that the GNSO and ccNSO members are experts in their respective fields and their recommendations fall within the relatively narrow and technical realm of that expertise, directors may rely on them to discharge their fiduciary duties, subject to the override where a significant majority (2/3) of the Board determines that such delegation is not appropriate. Similarly, while the realm of GAC advice is substantially broader (but not unlimited), we conclude that insofar as the representatives in the GAC are professional diplomats with expertise on matters of public policy and the Internet, delegation to the GAC (subject to the 2/3 override) and reliance by directors on GAC consensus advice for matters within GAC expertise, should not give rise to a violation of corporate nonprofit law. We emphasize that the Board would retain its supervisory role through its ability to override any particular consensus advice with a 2/3 vote, as it can with GNSO and ccNSO supermajority PDP recommendations. (We note in this connection that California law permits bylaws to require a higher-than-majority threshold for Board action.) Moreover, the Board retains the power, with the approval of the community, to revoke the arrangement altogether through the process for fundamental bylaw amendments. On the basis of the foregoing, we believe that the proposed requirement to follow GAC advice unless rejected by a 2/3 vote of the Board would be consistent with California law. Sincerely, Rosemary and Holly Rosemary E. 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