ICANN Board Withholds Consent for a Change of Control of the Public Interest Registry (PIR)

Thu Apr 30 23:30:45 EEST 2020

“ This proposed transaction has posed difficult questions to the ICANN Board
and the community, and the totality of the circumstances supports a denial
in this instance. If PIR is able to provide additional information that
resolves the concerns raised by the Board, PIR remains able to re-submit or
initiate a new Change of Control Request.”

In other words, back to the drawing board.

Joly

On Thu, Apr 30, 2020 at 11:40 PM Caleb Olumuyiwa Ogundele <
muyiwacaleb at gmail.com> wrote:

> In case you missed this.
>
> ______________________________________________________
>
> Today, the ICANN Board made the decision to reject the proposed change of
> control and entity conversion request that Public Interest Registry (PIR)
> submitted to ICANN.
>
> After completing extensive due diligence, the ICANN Board finds that
> withholding consent of the transfer of PIR from the Internet Society (ISOC)
> to Ethos Capital is reasonable, and the right thing to do.
>
> ICANN's role is to ensure the stable and secure operation of the
> Internet's unique identifier systems. We are dedicated to making the right
> decision, knowing that whatever we decide will be well received by some,
> and not by others. It is our responsibility to weigh all factors from an
> ICANN Bylaws and policies perspective, including considering the global
> public interest. We have done this diligently, ensuring as much
> transparency as possible and welcoming input from stakeholders throughout.
>
> On 13 November 2019, PIR announced
> <https://thenew.org/the-internet-society-public-interest-registry-a-new-era-of-opportunity/>
>  that ISOC, its parent organization, had reached an agreement with Ethos
> Capital, under which Ethos Capital would acquire PIR and all of its assets
> from ISOC. Under the agreement, PIR would also be converted from a
> Pennsylvania not-for-profit corporation to a for-profit Pennsylvania
> limited liability company. ISOC created and agreed to the transaction
> details that are under review.
>
> On 14 November 2019, PIR formally submitted
> <https://www.icann.org/en/system/files/correspondence/cimbolic-to-icann-14nov19-en.pdf>
>  to ICANN a "Notice of Indirect Change of Control and Entity Conversion"
> in advance of closing the proposed transaction between Ethos Capital and
> ISOC. Since 2003, PIR has operated the .ORG generic top-level domain (gTLD)
> as a not-for-profit organization, as well as six other gTLDs. Per the gTLD
>  Registry Agreements
> <https://newgtlds.icann.org/sites/default/files/agreements/agreement-approved-31jul17-en.html#article7.5>
> , ICANN must either approve or withhold consent of a proposed change of
> control, the deadline for which is 4 May 2020.
>
> ICANN's role has been to evaluate the reasonableness of PIR's request for
> indirect change of control and entity conversion. In doing so, ICANN evaluated
> an extensive amount and variety of information related to the proposed
> transaction, including details of the transaction structure, financing, and
> other funding sources of Ethos Capital, the parties involved, the role of
> the Pennsylvania authorities, information related to financial resources
> and operational and technical capability, how the new for-profit PIR under
> the control of Ethos Capital would be responsive to the needs of the
> non-commercial community, what input the .ORG community had provided to PIR
> or ISOC on the proposed transaction, and how that community input would
> be reflected in the operations of PIR following its conversion.
>
> Throughout this process, the ICANN Board has worked thoughtfully and
> thoroughly to determine if it is reasonable under PIR's Registry Agreements
> for ICANN to either approve or withhold consent to the proposed change of
> control. Before making our determination, the Board, among other things:
>
>    - Conducted thorough due diligence
>    - Received and reviewed hundreds of pages of documentation and
>    responses provided by PIR, ISOC and Ethos Capital following ICANN issuing
>    three requests for more information
>    - Was briefed extensively by ICANN org
>    - Received and considered more than 30 letters from stakeholders
>    - Considered input from an ICANN67 public forum, views of the
>    community and others who weighed in after we received PIR's Public Interest
>    Commitments
>    - Considered the opinions expressed in the California Attorney
>    General's Office letter sent to ICANN on 15 April 2020
>
> The Board was presented with a unique and complex situation – impacting
> one of the largest registries with more than 10.5 million domain names
> registered. After completing its evaluation, the ICANN Board finds that
> the public interest is better served in withholding consent as a result of
> various factors that create unacceptable uncertainty over the future of the
> third largest gTLD registry. Factors that were considered in determining
> reasonableness include, but are not limited to:
>
>    - A change from the fundamental public interest nature of PIR to an
>    entity that is bound to serve the interests of its corporate stakeholders,
>    and which has no meaningful plan to protect or serve the .ORG community.
>    - ICANN is being asked to agree to contract with a wholly different
>    form of entity; instead of maintaining its contract with the mission-based,
>    not-for-profit that has responsibly operated the .ORG registry for nearly
>    20 years, with the protections for its own community embedded in its
>    mission and status as a not-for-profit entity.
>    - The US$360 million debt instrument forces PIR to service that debt
>    and provide returns to its shareholders, which raises further question
>    about how the .ORG registrants will be protected or will benefit from this
>    conversion. This is a fundamental change in financial position from a
>    not-for-profit entity.
>    - There are additional uncertainties, such as an untested Stewardship
>    Council that might not be properly independent, or why PIR needs to change
>    its corporate form to pursue new business initiatives.
>    - The transaction as proposed relies on ICANN as a backstop for
>    enforcement of disputes between the .ORG community and the registry
>    operator in an untested manner.
>
> The entire Board stands by this decision. After thorough due diligence and
> robust discussion, we concluded that this is the right decision to take.
> While recognizing the disappointment for some, we call upon all involved to
> find a healthy way forward, with a keen eye to provide the best possible
> support to the .ORG community.
>
> The Board would like to thank the global community and stakeholders for
> their engagement.
>
> The resolution and rationale document, which expands upon this decision is
> available, here
> <https://www.icann.org/resources/board-material/resolutions-2020-04-30-en>
> .
>
-- 
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Joly MacFie  +2185659365
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