Re: [ifwp] Re: DNSO documents

Kent Crispin (kent@songbird.com)
Sat, 19 Dec 1998 12:36:28 -0800


On Fri, Dec 18, 1998 at 03:36:00PM -0500, Bret A. Fausett wrote:
> Kent Crispin wrote:
>
> Yes, but maybe it's because I am a lawyer (IAAL) that I find many
> companies risk averse in this respect. Perhaps individuals and smaller
> companies would be willing to participate and assume the risk of making
> policy decisions subject to their own personal liability,

Hmm, I would have thought the reverse, since I am relatively
risk-averse as far as legal matters are concerned...just goes to
show you.

> but I suspect
> that many of my legal brethren would counsel their clients and/or company
> employees to avoid unincoporated, policy-making SOs like the plague.
> There's no reason to disenfranchise the risk averse. But this may be an
> academic issue, because of the next question you present...
>
> >Don't you imagine that the ICANN board will be very
> >interested in maintaining as much legal insulation as it possibly can
> >for ICANN and all its members? Wouldn't it be the case that almost
> >all suits against ICANN would name the DNSOcorp as well?
>
> Yes. I cannot imagine that ICANN will let an SO be hung out to dry on
> liablity issues. What they will likely do (based solely on my reading of
> the tea leaves and what seems logical) is bring an unincorporated
> association under the umbrella of ICANN's corporate form, require the SO
> to incorporate (and perhaps purchase its own liability insurance), or
> agree to defend and indemnity the SO for any liability.
>
> As to the fact that any lawsuit will be against both ICANN and the DNSO,
> you're correct. But this doesn't insulate the DNSO from its own liability
> if it remains an unincorporated association.
>
> >My feeling is that the "legal protection" argument is weak.
>
> Not weak, but something that can be controlled through an indemnity
> agreement, insurance, incorporation, or a combination of the above. Legal
> protections always seem like wasted steps until they're needed.

I didn't express myself well. I think legal protections are
absolutely necessary. So the issue to me isn't legal protections;
the issue is simply finding the most efficient way to achieve them.

It seems to me that the simplest, most cost effective way would be to
exist under ICANN's umbrella. If ICANN doesn't want to do that (and
it may very will not want to), then the next most efficient is
probably to incorporate the DNSO. But I do believe separate
incorporation has a number of complexities you have not addressed.
More on that in a bit.

> >A better argument, I think, is the "convenience to ICANN" argument:
> >if the DNSO is a corp, then the recognition of the DNSO would
> >presumably be a contract between the two corporations. It would be
> >simpler to enter into such a contract; and it would be easier to get
> >out of such a contract. [Maybe. I am puzzled by the legal
> >implications of the fact that the DNSO selects 3 board members, and
> >I'm not sure how that fits into a contractual relationship.]
>
> Yes. And another (better) argument in favor of a more formal approach
> (whether it's incorportion or just coming up with a tight, well-defined
> set of bylaws)

Forgive my legal naivete. I was not distinguishing incorporation
from the formation of bylaws in our previous discussion, and of
course I should have. I have been thinking of the writing of bylaws
as essentially a mechanical exercise once the application is fleshed
out. That is, the difficult work here is in the negotiations, not in
the writing.

> is that it gives ICANN an established entity, with defined
> rules of governance, to tap as the DNSO. (But I've sounded this note so
> often I'm becoming a broken record.)

I believe you have had the luxury of missing the voluminous and often
rather heated discussions that have gone on before. If you had that
experience, I believe you would be more sympathetic to the view that
the problem not the form of the documents, but instead is the far
more fundamental problem of getting agreement on the content in the
first place.

You can't draft bylaws without some agreement about the nature of the
organization in question, and, in this case, finding that agreement
is hard work. The "application" has provided a convenient record
of the agreements that have been reached so far. We could change it
in 2 minutes to read "draft bylaws", and I am sure that any competent
lawyer, such as yourself, could convert it to a proper legal form for
bylaws in a few days. In computer science lingo, this is "merely an
implementation detail" -- the form, rather than the substance.

> If we're asking ICANN to tap a new,
> unknown association as the DNSO (requiring a large act of faith on the
> part of ICANN), we ought to at least give the Board a fully formed
> entity, with established rules of governance, to review and recognize.

That is precisely what we are trying to do. You are just too far
ahead where we actually are.

> >Three arguments against come to mind: first, we are creating a huge
> >amount of unnecessary mechanism; second, by being a part if ICANN we
> >automatically meet all the transparency etc requirements, but there
> >are always possibilities of conflicting interpretation when there are
> >separate corporations; and third, there are a bunch of additional
> >issues involved in creation of a corporation -- eg, where should it
> >be incorporated? [probably not the US...].
>
> Let me address these in turn. First, I don't see incorporation as a huge
> deal. The hard part is drafting Bylaws that everyone can deal with (no
> small task), but the filing formalities are minimal, the cost nominal,
> and the corporate formalities that a new DNSO corp would need to follow
> throughout the year are easy to follow.

The PSO has been calling such a corporate shell a "shim" corporation
(in the debate the cute phrase "sham shim corporation sometimes comes
up...) But there is a strong case that incorporation should not be in
the US. Does that change your perception of how easy it is?

> Second, ICANN transparency sets a minimal standard; the DNSO should be at
> least as transparent, and could even set a better example. As for the
> conflict issues, as I noted in a previous post, these may not be a
> concern in the present case, as the roles are clearly defined. ICANN is
> on top, and any conflicts are resolved in its favor.

Hmm. Good point. We could just explicitly defer such conflicts to
ICANN.

> Finally, there isn't really much to incorporating a non-profit other than
> what I've set out above. It's not rocket-science, and people have been
> known (so I hear) to do it successfully even without the assistance of a
> lawyer. Also, for a non-profit, I don't see much advantage to the choice
> of state of incorporation, though I'll defer to any corporate lawyers on
> the list.

Substitute "choice of country" for "choice of state". The DNSO is an
international organization, with broad membership from all over the
world, so the country of incorporation becomes a substantial
political problem. The IAHC chose to establish CORE in Geneva, and
got a bunch of flak for that; incorporating in the US was sure to
raise a loud uproar, as well.

kent

-- 
Kent Crispin, PAB Chair				"Do good, and you'll be
kent@songbird.com				lonesome." -- Mark Twain