Guest blog: California Law Is No Impediment to Holding ICANN Accountable

No other issue unites the Internet community quite like ICANN’s accountability deficit. Governments, contracted parties, commercial interests, NGOs, and ordinary Internet users—all have expressed their shared frustration that ICANN continues to evade real accountability.

The problem is partly explained by the complexity of ICANN’s structure and powers. It is both the overall global manager for the Internet DNS and a California nonprofit corporation. Its unique marriage of public power and private corporate form obscures familiar lines of thinking about how organizations work and how to improve their accountability.

But its unique form cannot alter ICANN’s legal character as a nonprofit corporation organized under, and therefore bound by, California law. The vast importance of its responsibilities as overall manager of the Internet DNS cannot. Neither can its global reach. That is why a dispute between ICANN and Working Group 4 (“WG4”) of the Accountability and Transparency Review Team (“ATRT”) is so telling.
WG4 was assigned to review ICANN’s establishment of “an appeal mechanism for Board decisions.” Its investigation of ICANN’s remedial mechanisms concluded that only the Independent Review Panel (“IRP”) was sufficiently independent from the board, and its suitability was questioned because “its decisions and recommendations are not binding on the ICANN Board.” WG4 asked ICANN for its views of such binding authority as a matter of California law, to which ICANN replied with a one-page document insisting that under California law “the board cannot empower any entity to overturn decisions or actions of the board.”

Resolving the resulting impasse struck WG4 as “critical to establishing an appeals mechanism that is both binding and independent, and essential to the viability of the ICANN model itself.” In its draft recommendations, WG4 indicated that “pending further research” it would “[c]hallenge ICANN’s interpretation of California corporate governance law as it applies to ICANN policy development.”

ATRT disagreed. It conceded that it “did not reach consensus on whether binding authority was the standard upon which to judge ICANN’s accountability.” At the same time, ATRT acknowledged that “further legal analysis” is necessary to determine whether California law permits the ICANN board to be subject to binding review for alleged departures from the articles or bylaws.

An attached memorandum provides such further analysis by examining ICANN’s legal position in light of the controlling statutory provisions found in the California Nonprofit Public Benefit Corporation Law. It concludes that California law permits ICANN’s board of directors to adopt a binding form of review. ICANN may resist independent and binding accountability on other grounds, but it cannot fairly claim to resist in order to comply with the law.

A few highlights include:
* Binding review of the ICANN board is available through the creation of statutory members who, by statute, have “the right to elect and remove directors”; “the right to sue the directors in derivative actions, or third parties on behalf of the corporation”; and “other rights spelled out in the statutes and in the corporation’s bylaws.” It is well established that “[t]hese rights can be enforced in civil court actions.”
* California law vests nonprofit corporations with broad powers to structure their internal affairs by amending the articles and bylaws. Indeed, unless doing so would violate a super-majority voting requirement, the law permits the articles and bylaws to be amended to “restrict or eliminate the power of the board to adopt, amend or repeal any or all bylaws ….”
* The board’s fiduciary duties do not excuse it from its duty to be accountable to the community whose activities it regulates. ICANN’s legal position implies a false choice between fidelity to these duties and its subjection to independent and binding review. If the board would not unlawfully “abdicate” its authority by creating statutory memberships, with extensive powers over the board, it would not do so by adopting a form of binding review with presumably lesser powers.

ICANN simply misinterprets California law. The board may create members with the powers to elect and remove directors or to bring a derivative action against the corporation. It may also amend the bylaws however it chooses, even to the extent of denying itself power to alter the bylaws. Any of these devices might be used to establish an appeals mechanism (through statutory members or some other body) with the power to reverse objectionable board actions.

ICANN is bound by California law, and that law permits binding review of the board. It is on that understanding that future discussions of ICANN’s accountability should proceed.

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