Anne, My answers are below. Greg On Fri, Jun 12, 2015 at 12:38 PM, Aikman-Scalese, Anne <AAikman@lrrlaw.com> wrote:

Greg,

My questions are as follows:

1. Is it clear that the separate entity that controls the root is going to be a subsidiary of ICANN and if so do we know that the new membership corporation as recommended by CCWG Accountability can legally have a sub that is not subject to the membership?

​As proposed, Post-Transition IANA (PTI) will be set up a​s a non-profit corporation (specifically, a California public benefit corporation (PBC)). Typically, non-profits cannot be owned (they do not issue shares or units or the like), so PTI will not technically be a subsidiary in that sense. Rather, it will be set up as a membership PBC with ICANN as the sole member (PBC members are not the same as LLC members, which are owners). Thus, it would be most correct to refer to PTI as a controlled affiliate of ICANN (both through the sole membership and the fact that the Board will be an "inside" board rather than an independent board. I know of no legal impediment to this structure, and we have been advised by both Sidley Austin and Adler & Colvin (a leading California-based non-profit specialty law firm) that this structure is legally sound. Further, I'm not exactly sure what you mean by "not subject to the membership." Members have various rights under California law and as contemplated by the CCWG proposal; typically, these are exercised as approvals or vetos of certain types of Board decisions, and the right to recall directors appointed by a particular member or for the membership to oust the entire board. The members do not have direct control of management or staff decisions within the corporation, and this would extend to an affiliate like PTI. The membership will have the ability to veto strategic plans and budgets, and the reasons for this could include dissatisfaction with strategic plan or budget items relating to PTI. Similarly, the members could oust (or threaten to oust) the board due to dissatisfaction with ICANN's (and thus the Board's) handling of matters, including matters relating to PTI. While these may seem like extreme solutions, in practice it is expect that these would be rarely (if ever) used. Instead, these are disciplining factors that force (or inspire) the Board and by extension management to engage with the community and arrive at exceptional solutions so that these measures need never be reached.

2. Regarding the Board of Directors for the separate entity – With a total of 5 persons, two are ICANN (parent) staff, two are independent directors, and one is called the IANA Managing Director – a current position that will now move onto this Board. To whom will this person report? Will it be clear that this person reports to the Board of the separate entity? Also, what happens when that Board is voting on her contract and there are 4 votes, not 3 because she cannot vote?

​The exact composition of the PTI Board is not graven in stone, except that a majority of the Board will be appointed by ICANN (i.e., it will be an "inside" Board​), so that PTI remains a "controlled affiliate" of ICANN. We have been advised that it typical for the CEO of a subsidiary or a controlled affiliate to serve on that entity's board, and the IANA Managing Director is the equivalent of the CEO of PTI (and may end up being the President of the corporation when the structure is fleshed out). This is not a "turnkey" proposal where every level of implementation has been worked out w9e would take another 6 months at least if that were the task), so more detailed implementation matters have been left for a later phase. That said, I would expect that this person will report to the Board (as is typical) and to senior management of ICANN (as is also typical). Currently, Elise Gerich, the head of the IANA staff, reports to Akram Atallah, the President of the Global Domains Division; it has not yet been determined whether this reporting line will be maintained. The details of how her contract is approved, how she would be terminated, etc., have not yet been detailed, but since this is based on a relatively typical structure, I expect that there are existing approaches that will be evaluated and put into place when we reach that level of detail.

3. Regarding the Customer Satisfaction group, what input do non-Contracted parties have to that group.

​I assume you are referring to the Customer Standing Committee (CSC). The CSC will be focused on day-to-day operational oversight of the IANA Functions Operator, primarily relating to naming functions. As set forth in Annex G, the composition of the CSC will include liaisons from the other SO/ACs, including GNSO (non-registry), ALAC, GAC, etc. It is possible that the GNSO liaison will be from one of the non-contracted party stakeholder groups, but it is up to each stakeholder organization to determine how to appoint its liaison. If the CSC is unable to resolve performance issues, they will be escalated, ultimately to the a special IANA Function Review (IFR) team, which will be more multistakeholder. Given the tight focus on operational matters and its relatively modest powers, having a non-contracted party as a regular matter was not deemed critical (though it was discussed extensively and not conceded easily, and these discussions did contribute to the modesty of those powers and the tightness of that focus). I hope these answers are helpful to you and to other CSG members subscribed to this email list. Greg

Thank you,

Anne

*Anne E. Aikman-Scalese, Of Counsel*

*Lewis Roca Rothgerber LLP | *

*One South Church Avenue Suite 700 | Tucson, Arizona 85701-1611*

*(T) 520.629.4428 <520.629.4428> | (F) 520.879.4725 <520.879.4725>*

*AAikman@LRRLaw.com <AAikman@LRRLaw.com>** | www.LRRLaw.com <http://www.lrrlaw.com/>*

*From:* csg-iana-bounces@icann.org [mailto:csg-iana-bounces@icann.org] *On Behalf Of *Greg Shatan *Sent:* Friday, June 12, 2015 7:55 AM *To:* csg-iana@icann.org *Subject:* [CSG-IANA] Fwd: CWG-Stewardship Response for Chartering Organization Consideration and Approval

All:

As you may already be aware, the CWG-Stewardship has now transmitted the Final Proposal on IANA Transition to the chartering organizations (including the GNSO) for approval. After receiving such approvals, the Proposal will be transmitted to the ICG in response to their RFP.

The Final Proposal strongly resembles the second draft proposal submitted for public comment. While no sweeping changes have been made, a number of more nuanced revisions have been made throughout the document.

​If you have any questions regarding the Final Proposal, please do not hesitate to ask.​

Greg

---------- Forwarded message ---------- From: *Glen de Saint Géry* <Glen@icann.org> Date: Fri, Jun 12, 2015 at 6:25 AM Subject: CWG-Stewardship Response for Chartering Organization Consideration and Approval

To: "'gregshatanipc@gmail.com' (gregshatanipc@gmail.com)" < gregshatanipc@gmail.com>, "Metalitz, Steven" <met@msk.com>, "claudio di gangi (ipcdigangi@gmail.com)" <ipcdigangi@gmail.com> Cc: "gnso.secretariat@gnso.icann.org" <gnso.secretariat@gnso.icann.org>, Marika Konings <marika.konings@icann.org>

*For your Information*

*Sent on behalf of CWG-Stewardship Chairs by support staff. *

To: CWG-Stewardship Chartering SOs and ACs

The ALAC, ccNSO, GAC, GNSO, and SSAC

Dear SO and AC Chairs,

*CWG-Stewardship proposed response to the ICG RFP the IANA Stewardship Transition*

The Cross Community Working Group on Naming Related Functions (CWG-Stewardship) is pleased to provide its Chartering Organizations with its proposed response to the IANA Stewardship Transition Coordination Group (ICG) Request for Proposals on the IANA Stewardship Transition for your consideration and approval as per its Charter.

The response is the result of extensive work by the CWG’s 19 members, 133 participants and a team of highly qualified legal advisors over the past year, which included over 100 calls or meetings, 2 public consultations and more than 4,000 email messages. It represents a carefully crafted balance between key requirements, specific legal advice, and significant compromises by all who participated and includes diligent attention to the input received through the Public Comment proceedings. The final proposal has received the consensus support of the CWG-Stewardship with no objections or minority statements recorded for Chartering Organization consideration.

As noted in the CWG-Stewardship proposal itself, the proposal is significantly dependent and expressly conditioned on the implementation of ICANN-level accountability mechanisms proposed by the Cross Community Working Group on Enhancing ICANN Accountability (CCWG-Accountability). The co-chairs of the CWG-Stewardship and the CCWG-Accountability have coordinated their efforts and the CWG-Stewardship is confident that the CCWG-Accountability recommendations, if implemented as expected, will meet the requirements that the CWG-Stewardship has previously communicated to the CCWG. If any element of these ICANN level accountability mechanisms is not implemented as contemplated by the CWG-Stewardship proposal, this proposal will require revision.

We also note that there are certain implementation elements that will require further dialogue in the near future, including with the other operational communities, and these have been marked as such in the final proposal. Two specific issues are particularly important to highlight. One is the finalization of the service level expectations (SLEs), where the proposal includes a set of agreed principles between the CWG and IANA, but these remain to be finalized in the form of a mutually agreed set of SLEs. A detailed plan for this finalisation is being worked on and it is our view that this detail, whilst vitally important, does not impact on the substance of the proposal put to you for approval. The second issue entails the location of intellectual property rights and this needs further discussion with the other respondents to the ICG RFP and ICANN.

As per the CWG-Stewardship’s Charter we now seek your approval to submit this final proposal to the ICG and ask you to consider this approval in accordance with your respective SO or AC rules and procedures by 25 June 2015 to meet the overall timing requirements which would allow the transition to proceed, noting that final approval is conditional on the approval of the CCWG-Accountability Work Stream 1 recommendations.

We will make ourselves, together with or other key contributors, available to you at the ICANN 53 meeting in Buenos Aires in order to answer any questions you may have and to explain any details of the proposal. For your information, further background documents as well as the slides, recordings and transcripts of recent webinars explain the details of the final proposal are available here: https://community.icann.org/x/sJc0Aw.

Should you have any further questions please do not hesitate to contact us.

Lise Fuhr & Jonathan Robinson

*Co-Chairs, CWG-Stewardship*

------------------------------

This message and any attachments are intended only for the use of the individual or entity to which they are addressed. If the reader of this message or an attachment is not the intended recipient or the employee or agent responsible for delivering the message or attachment to the intended recipient you are hereby notified that any dissemination, distribution or copying of this message or any attachment is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to the sender. The information transmitted in this message and any attachments may be privileged, is intended only for the personal and confidential use of the intended recipients, and is covered by the Electronic Communications Privacy Act, 18 U.S.C. §2510-2521.

Anne, My answers are below. On Mon, Jun 15, 2015 at 1:56 PM, Aikman-Scalese, Anne <AAikman@lrrlaw.com> wrote:

Thanks Greg – this is helpful but I am still not clear on the nature of the IANA functions entity in comparison to ICANN itself. Are both entities membership corporations or only one?. Jonathan Robinson said that the membership would have “indirect” control over the IANA functions entity, but only by way of its control over ICANN itself. This is why I am particularly interested in how the IANA functions entity is controlled. It is reported that the IANA functions entity will have 5 directors, two of which are ICANN staff, two of which are independent, and then one IANA Managing Director (who is currently ICANN staff?)

Is it correct that the new ICANN will be a membership entity but that its affiliated IANA functions entity will not be a membership entity?

​I'm not sure I would call ICANN post-transition "the new ICANN" -- it will be the same corporation, it's just that the membership option (an option for all California public benefit corporations) will be activated, so to speak. The IANA functions entity (PTI) will have a single member -- ICANN.​

(This is what I took away from the webinar on stewardship.) Still curious as to that 5th director of the IANA functions entity – the “IANA Managing Director” and how the membership can in any way affect that vote. In addition, I think the two directors that come from ICANN onto the IANA functions company Board are not ICANN Board Directors. Therefore, it seems to me that the IANA functions Board is not in fact controlled by ICANN and is not subject to action by the members.

​It's my understanding that as long as the three (out of five) PTI directors appointed by ICANN are employees of ICANN or PTI, PTI would be controlled by ICANN. Interestingly, using ICANN Board members as PTI Board members would disqualify and *not* qualify PTI as controlled by ICANN, since ICANN Board members are not appointed or chosen by ICANN, they are appointed by the community. Thus a PTI Board with, e.g., 3 ICANN Board members and two independent directors would be considered an "outside" board and ICANN would not control PTI. Sidley gave explicit advice on this point. I have somewhat more clarity on the 5th director -- this would be the President/CEO of PTI (Managing Director came from British usage)​. I'm not sure what you mean by membership "affecting the vote" of the MD/CEO. I think the question may be, how can ICANN affect this vote? The way that membership affects any vote of the PTI Board is the same -- through the powers the membership has over the ICANN Board. So, if ICANN can affect the CEO's vote the way it can affect its employees' votes, then it flows the same way. If ICANN cannot affect the CEO's vote, then that's an issue for "control" generally, and not just for membership.

Can you please describe more specifically the members’ indirect control over the IANA functions entity in this scenario? Say, for example, some new IANA Managing Director (not Elise) is doing a very poor job and security and stability problems abound. Do the 29 members of the new ICANN membership corporation have any recourse?

​I think the more relevant control over issues in IANA Performance is through the CSC, the IANA Functions Review Team and ultimately through a Separation Working Group, which would mandate a change in leadership or possibly a complete change in IFO, depending on their analysis. That is the primary oversight and accountability mechanism to deal with this issue. That said, if the membership felt that senior management and ultimately the ICANN Board was not managing PTI properly, and was turning a deaf ear to community demands, the main indirect control the members would have is through removing ICANN Board members that were not forcing action on this issue and replacing them with those that would. Greg

Thank you,

Anne

*Anne E. Aikman-Scalese, Of Counsel*

*Lewis Roca Rothgerber LLP | *

*One South Church Avenue Suite 700 | Tucson, Arizona 85701-1611*

*(T) 520.629.4428 <520.629.4428> | (F) 520.879.4725 <520.879.4725>*

*AAikman@LRRLaw.com <AAikman@LRRLaw.com>** | www.LRRLaw.com <http://www.lrrlaw.com/>*

*From:* Greg Shatan [mailto:gregshatanipc@gmail.com] *Sent:* Friday, June 12, 2015 1:25 PM *To:* Aikman-Scalese, Anne *Cc:* csg-iana@icann.org *Subject:* Re: [CSG-IANA] Fwd: CWG-Stewardship Response for Chartering Organization Consideration and Approval

Anne,

My answers are below.

Greg

On Fri, Jun 12, 2015 at 12:38 PM, Aikman-Scalese, Anne <AAikman@lrrlaw.com> wrote:

Greg,

My questions are as follows:

1. Is it clear that the separate entity that controls the root is going to be a subsidiary of ICANN and if so do we know that the new membership corporation as recommended by CCWG Accountability can legally have a sub that is not subject to the membership?

​As proposed, Post-Transition IANA (PTI) will be set up a​s a non-profit corporation (specifically, a California public benefit corporation (PBC)). Typically, non-profits cannot be owned (they do not issue shares or units or the like), so PTI will not technically be a subsidiary in that sense. Rather, it will be set up as a membership PBC with ICANN as the sole member (PBC members are not the same as LLC members, which are owners). Thus, it would be most correct to refer to PTI as a controlled affiliate of ICANN (both through the sole membership and the fact that the Board will be an "inside" board rather than an independent board. I know of no legal impediment to this structure, and we have been advised by both Sidley Austin and Adler & Colvin (a leading California-based non-profit specialty law firm) that this structure is legally sound. Further, I'm not exactly sure what you mean by "not subject to the membership." Members have various rights under California law and as contemplated by the CCWG proposal; typically, these are exercised as approvals or vetos of certain types of Board decisions, and the right to recall directors appointed by a particular member or for the membership to oust the entire board. The members do not have direct control of management or staff decisions within the corporation, and this would extend to an affiliate like PTI. The membership will have the ability to veto strategic plans and budgets, and the reasons for this could include dissatisfaction with strategic plan or budget items relating to PTI. Similarly, the members could oust (or threaten to oust) the board due to dissatisfaction with ICANN's (and thus the Board's) handling of matters, including matters relating to PTI. While these may seem like extreme solutions, in practice it is expect that these would be rarely (if ever) used. Instead, these are disciplining factors that force (or inspire) the Board and by extension management to engage with the community and arrive at exceptional solutions so that these measures need never be reached.

2. Regarding the Board of Directors for the separate entity – With a total of 5 persons, two are ICANN (parent) staff, two are independent directors, and one is called the IANA Managing Director – a current position that will now move onto this Board. To whom will this person report? Will it be clear that this person reports to the Board of the separate entity? Also, what happens when that Board is voting on her contract and there are 4 votes, not 3 because she cannot vote?

​The exact composition of the PTI Board is not graven in stone, except that a majority of the Board will be appointed by ICANN (i.e., it will be an "inside" Board​), so that PTI remains a "controlled affiliate" of ICANN. We have been advised that it typical for the CEO of a subsidiary or a controlled affiliate to serve on that entity's board, and the IANA Managing Director is the equivalent of the CEO of PTI (and may end up being the President of the corporation when the structure is fleshed out). This is not a "turnkey" proposal where every level of implementation has been worked out w9e would take another 6 months at least if that were the task), so more detailed implementation matters have been left for a later phase. That said, I would expect that this person will report to the Board (as is typical) and to senior management of ICANN (as is also typical). Currently, Elise Gerich, the head of the IANA staff, reports to Akram Atallah, the President of the Global Domains Division; it has not yet been determined whether this reporting line will be maintained. The details of how her contract is approved, how she would be terminated, etc., have not yet been detailed, but since this is based on a relatively typical structure, I expect that there are existing approaches that will be evaluated and put into place when we reach that level of detail.

3. Regarding the Customer Satisfaction group, what input do non-Contracted parties have to that group.

​I assume you are referring to the Customer Standing Committee (CSC). The CSC will be focused on day-to-day operational oversight of the IANA Functions Operator, primarily relating to naming functions. As set forth in Annex G, the composition of the CSC will include liaisons from the other SO/ACs, including GNSO (non-registry), ALAC, GAC, etc. It is possible that the GNSO liaison will be from one of the non-contracted party stakeholder groups, but it is up to each stakeholder organization to determine how to appoint its liaison. If the CSC is unable to resolve performance issues, they will be escalated, ultimately to the a special IANA Function Review (IFR) team, which will be more multistakeholder. Given the tight focus on operational matters and its relatively modest powers, having a non-contracted party as a regular matter was not deemed critical (though it was discussed extensively and not conceded easily, and these discussions did contribute to the modesty of those powers and the tightness of that focus).

I hope these answers are helpful to you and to other CSG members subscribed to this email list.

Greg

Thank you,

Anne

*Anne E. Aikman-Scalese, Of Counsel*

*Lewis Roca Rothgerber LLP | *

*One South Church Avenue Suite 700 | Tucson, Arizona 85701-1611*

*(T) 520.629.4428 <520.629.4428> | (F) 520.879.4725 <520.879.4725>*

*AAikman@LRRLaw.com <AAikman@LRRLaw.com>** | www.LRRLaw.com <http://www.lrrlaw.com/>*

*From:* csg-iana-bounces@icann.org [mailto:csg-iana-bounces@icann.org] *On Behalf Of *Greg Shatan *Sent:* Friday, June 12, 2015 7:55 AM *To:* csg-iana@icann.org *Subject:* [CSG-IANA] Fwd: CWG-Stewardship Response for Chartering Organization Consideration and Approval

All:

As you may already be aware, the CWG-Stewardship has now transmitted the Final Proposal on IANA Transition to the chartering organizations (including the GNSO) for approval. After receiving such approvals, the Proposal will be transmitted to the ICG in response to their RFP.

The Final Proposal strongly resembles the second draft proposal submitted for public comment. While no sweeping changes have been made, a number of more nuanced revisions have been made throughout the document.

​If you have any questions regarding the Final Proposal, please do not hesitate to ask.​

Greg

---------- Forwarded message ---------- From: *Glen de Saint Géry* <Glen@icann.org> Date: Fri, Jun 12, 2015 at 6:25 AM Subject: CWG-Stewardship Response for Chartering Organization Consideration and Approval

To: "'gregshatanipc@gmail.com' (gregshatanipc@gmail.com)" < gregshatanipc@gmail.com>, "Metalitz, Steven" <met@msk.com>, "claudio di gangi (ipcdigangi@gmail.com)" <ipcdigangi@gmail.com> Cc: "gnso.secretariat@gnso.icann.org" <gnso.secretariat@gnso.icann.org>, Marika Konings <marika.konings@icann.org>

*For your Information*

*Sent on behalf of CWG-Stewardship Chairs by support staff. *

To: CWG-Stewardship Chartering SOs and ACs

The ALAC, ccNSO, GAC, GNSO, and SSAC

Dear SO and AC Chairs,

*CWG-Stewardship proposed response to the ICG RFP the IANA Stewardship Transition*

The Cross Community Working Group on Naming Related Functions (CWG-Stewardship) is pleased to provide its Chartering Organizations with its proposed response to the IANA Stewardship Transition Coordination Group (ICG) Request for Proposals on the IANA Stewardship Transition for your consideration and approval as per its Charter.

The response is the result of extensive work by the CWG’s 19 members, 133 participants and a team of highly qualified legal advisors over the past year, which included over 100 calls or meetings, 2 public consultations and more than 4,000 email messages. It represents a carefully crafted balance between key requirements, specific legal advice, and significant compromises by all who participated and includes diligent attention to the input received through the Public Comment proceedings. The final proposal has received the consensus support of the CWG-Stewardship with no objections or minority statements recorded for Chartering Organization consideration.

As noted in the CWG-Stewardship proposal itself, the proposal is significantly dependent and expressly conditioned on the implementation of ICANN-level accountability mechanisms proposed by the Cross Community Working Group on Enhancing ICANN Accountability (CCWG-Accountability). The co-chairs of the CWG-Stewardship and the CCWG-Accountability have coordinated their efforts and the CWG-Stewardship is confident that the CCWG-Accountability recommendations, if implemented as expected, will meet the requirements that the CWG-Stewardship has previously communicated to the CCWG. If any element of these ICANN level accountability mechanisms is not implemented as contemplated by the CWG-Stewardship proposal, this proposal will require revision.

We also note that there are certain implementation elements that will require further dialogue in the near future, including with the other operational communities, and these have been marked as such in the final proposal. Two specific issues are particularly important to highlight. One is the finalization of the service level expectations (SLEs), where the proposal includes a set of agreed principles between the CWG and IANA, but these remain to be finalized in the form of a mutually agreed set of SLEs. A detailed plan for this finalisation is being worked on and it is our view that this detail, whilst vitally important, does not impact on the substance of the proposal put to you for approval. The second issue entails the location of intellectual property rights and this needs further discussion with the other respondents to the ICG RFP and ICANN.

As per the CWG-Stewardship’s Charter we now seek your approval to submit this final proposal to the ICG and ask you to consider this approval in accordance with your respective SO or AC rules and procedures by 25 June 2015 to meet the overall timing requirements which would allow the transition to proceed, noting that final approval is conditional on the approval of the CCWG-Accountability Work Stream 1 recommendations.

We will make ourselves, together with or other key contributors, available to you at the ICANN 53 meeting in Buenos Aires in order to answer any questions you may have and to explain any details of the proposal. For your information, further background documents as well as the slides, recordings and transcripts of recent webinars explain the details of the final proposal are available here: https://community.icann.org/x/sJc0Aw.

Should you have any further questions please do not hesitate to contact us.

Lise Fuhr & Jonathan Robinson

*Co-Chairs, CWG-Stewardship*

------------------------------

This message and any attachments are intended only for the use of the individual or entity to which they are addressed. If the reader of this message or an attachment is not the intended recipient or the employee or agent responsible for delivering the message or attachment to the intended recipient you are hereby notified that any dissemination, distribution or copying of this message or any attachment is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to the sender. The information transmitted in this message and any attachments may be privileged, is intended only for the personal and confidential use of the intended recipients, and is covered by the Electronic Communications Privacy Act, 18 U.S.C. §2510-2521.

------------------------------

This message and any attachments are intended only for the use of the individual or entity to which they are addressed. If the reader of this message or an attachment is not the intended recipient or the employee or agent responsible for delivering the message or attachment to the intended recipient you are hereby notified that any dissemination, distribution or copying of this message or any attachment is strictly prohibited. If you have received this communication in error, please notify us immediately by replying to the sender. The information transmitted in this message and any attachments may be privileged, is intended only for the personal and confidential use of the intended recipients, and is covered by the Electronic Communications Privacy Act, 18 U.S.C. §2510-2521.