Accountability wins! Independent Review Panel upholds ICM Registry – .XXX is alive.

In a historic decision, ICANN's Independent Review Process has dealt ICANN's past leadership a severe rebuke. The three judge panel upheld ICM Registry's claim that ICANN treated its application for a .xxx top level domain in an unfair and discriminatory manner. The panelists ruled that the ICANN Board had decided on June 1, 2005 that the .XXX sTLD application met the required sponsorship criteria, and that its “reconsideration of that finding was not consistent with the application of neutral, objective and fair documented policy.”

The ruling's description of the events makes it clear that Paul Twomey and Vinton Cerf pressed for a reconsideration of the .xxx application because of the “volte face in the position of the U.S. government” in early August 2005. (p. 16)

The .xxx challenge was the first test of ICANN's independent review process (IRP). Accountability has always been one of the key issues raised by the creation of ICANN's private-sector based regulatory regime. The .xxx process was such a thorough breakdown in ICANN's process — involving a direct, documented threat from the US government not to place the domain in the root even if ICANN approved it, an untimely and ultra vires intervention by the GAC, and a complete departure from its announced criteria for approving domains — that it provided the perfect test case for the IRP. If ICANN could get away with what it did in the .xxx case, it can get away with anything. The existence of an independent “judicial review” is a critical but heretofore missing piece of the accountability puzzle. Fortunately, .xxx was backed by a wealthy businessman with the determination and the money required to mount a challenge. Informal estimates place the cost to Stuart Lawley at around $3-4 million. In the future, however, the IRP will need to be strengthened to make it more accessible, and also more binding.

There can be no complaints about the objectivity and credentials of the panel that made the decision. Judge Stephen M. Schwebel – selected to chair the panel by mutual agreement of both parties  – is an American expert on international law who served as a Judge of the International Court of Justice from 1981 to 2000 and was ICJ's President from 1997 – 2000. Jan Paulsson, selected by ICM Registry, is a reknowned expert in international arbitrarion who was president of both the London Court of International Arbitration and the World Bank Administrative Tribunal, and was recently appointed the Michael Klein Distinguished Scholar Chair at the University of Miami Law School. Dickran M. Tevrizian, Jr., who ICANN selected to serve on the panel, was a United States federal judge for the Central District of California.

The International Center for Dispute Resolution upheld only one of ICANN's contentions in the dispute. The IRP, it agreed, was not a form of binding arbitration. And so it now rests with the ICANN Board to determine how to respond to the decision. On all other points of contention, the independent panel sided with ICM Registry, setting important procedural and substantive precedents.

ICANN's legal team had argued that the Board's actions should be granted “deference;” in other words, the panel should not review and second-guess the whole decision making process, but should instead presume that the Board acted responsibly and look only for the grossest violations of law or procedure. The panel disagreed with ICANN, ruling that the “actions and decisions of the ICANN Board are not entitled to deference whether by application of the “business judgment” rule or otherwise; they are to be appraised not deferentially but objectively.”

There was also an important but rather technical legal dispute about the degree to which international law applied. Citing Article 4 of ICANN’s Articles of Incorporation, which obligates ICANN to “operate for the benefit of the Internet community as a whole, carrying out its activities in conformity with relevant principles of international law and applicable international conventions and local law,” the panel ruled that ICANN must “operate in conformity with relevant general principles of law (such as good faith) as well as relevant principles of international law, applicable international conventions, and the law of the State of California.”

Fourth, the panel ruled that ICANN's Board in adopting its resolutions of June 1, 2005, had found that the application of ICM Registry for the .XXX sTLD met the required sponsorship criteria – an important factual issue at dispute in the case. This was important because ICANN's final resolution killing the .xxx domain was based mainly on the argument that .xxx had not met the sponsorship criteria.

Fifth, and most central, the panel ruled that the Board’s reconsideration of its sponsorship finding was not consistent with the application of neutral, objective and fair documented policy.

According to the decision, ICANN must now bear all costs of the IRP Provider. It will have to pay ICM Registry about $250,000 to cover its share of the panel expenses. It does not, however, have to reimburse ICM Registry for its legal expenses.

ICM registry, logically enough, is asking ICANN to conclude the
contract that was about to be signed when the US government intervened
August 11, 2005. This is a reasonable request, given that ICANN's own
review process has determined that its rejection of the application was
unfair and discriminatory. If anyone cares to read the decision in
detail, they can see for themselves how ICANN's reasons for rejecting
the domain are reduced to rubble and dismissed as “pretextual.” The
most reasonable course of action would be for ICANN to award ICM
Registry the .xxx domain – in effect, writing the final chapter in the
2004-5 sponsored top level domain round that led to the addition of
.mobi, .jobs, .cat, and (most recently) .post.  

If one understands what was at stake in this case, one realizes that this “defeat” for ICANN's past President and Board Chair (and the Bush Administration) is actually a great victory for ICANN as an institution. ICM Registry, to its credit (and defying sceptics such as myself) chose to use ICANN's own appeals process rather than the U.S. Court system to challenge its maltreatment. That internal appeals process has shown that it can produce objective, fair and independent decisions (if you have enough money). It is now ICANN's turn to show the same respect for its own processes as its opponent in this case.

4 comments

  1. Anonymous

    I agree that ICANN's mutal agreement with ICM Registry to submit this particular question to a particular mutally-agreed arbitration body, under particular mutually-agreed procedural rules, is a significant step. But it does not constitute an independent review in accordance with ICANN's Bylaws. It does not fulfill ICANN's continuing obligation to implement its independent review Bylaws by designating an independent review provider and adopting procedures for independent review — not on an ad hoc basis, not by mutual agreement after secret negotiations with a single party, and not by secret ex parte negotiations with a prospective arbitration provider while independent review requests are already pending, but through a policy development process conforming with the procedural rules for policy decisions in ICANN's Bylaws.
    ICANN has shown that it is sometimes willing, when it is dealing with a commercial issue rather than one of principle, and a commercial opponent with deep pockets, to agree to submit certain questions to arbitration.
    Now it needs to move beyond that step to adopt policies for independent review in accordance with its Bylaws, and to deal with the backlog of independent review requests pre-dating ICM registry's arbitration request.

  2. Anonymous

    Hi Milton,
    I did my homework and read the decision (along with AoC favorite passage “[ICANN commits to] the consideration of an appeal mechanism for Board decisions”).
    In a nutshell, it's all procedural/governance. The decision paragraph 136 tells it all:

    136.
    [ICANN] is a not-forprofit corporation established under the law of the State of California. […]
    However ICANN is no ordinary non-profit California corporation. The Government of the United States vested regulatory authority of vast dimension and pervasive global reach in ICANN.
    In “recognition of the fact that the Internet is an international network of networks, owned by no single nation, individual or organization” – including ICANN — ICANN is charged with “promoting the global public interest in the operational stability of the Internet…” ICANN “shall operate for the benefit of the Internet community as a whole, carrying out its activities in conformity with relevant principles of international law and applicable international conventions and local law…”
    Thus, while a California corporation, it is governed particularly by the terms of its Articles of Incorporation and Bylaws, as the law of California allows.
    […]
    In the view of the Panel, the judgments of the ICANN Board are to be reviewed and appraised by the Panel objectively, not deferentially. The business judgment rule of the law of California, applicable to directors of California corporations, profit and nonprofit, in the case of ICANN is to be treated as a default rule that might be called upon in the absence of relevant provisions of ICANN’s Articles and Bylaws and of specific representations of ICANN – as in the RFP – [to which the claimant ICM responded in the first place] that bear on the propriety of its conduct.
    […]

    It's the last phrase “that bear on the proprietary of its conduct” which is at once serious for ICANN and a defined limit on how the Panel saw its role.
    The next run may look at how binding is the AoC “appeal mechanism” for the board.
    Basically, a great opportunity for ICANN to improve its decision-making processes!
    – Thierry Moreau

  3. Anonymous

    I'm actually really glad to see that ICM Registry will get the .xxx domain. The entire litigation and legal battle aside – I'm simply happy because it will make it just a tiny bit easier to restrict certain sites on my home and work networks. I've got young kids and employee – I need this:)

  4. Anonymous

    If anyone cares to read the decision in detail, they can see for themselves how ICANN's reasons for rejecting the domain are reduced to rubble and dismissed as “pretextual.”