Consideration of the Afilias Domains No. 3 Ltd. v. ICANN (.WEB) Independent Review Process Final Declaration

Seven applicants submitted applications for the right to operate .WEB, including Afilias Domains No. 3 Ltd. (Afilias)4 and Nu Dotco LLC (NDC), and, as the members of the .WEB contention set did not privately resolve contention, the applicants went to an ICANN auction of last resort. An auction was held on 27-28 July 2016, which concluded with NDC prevailing with a bid of US$135 million. Shortly thereafter, Verisign Inc. (Verisign) publicly disclosed that, pursuant to an agreement it had entered with NDC, Verisign provided the funds for NDC's bid in exchange for, among other things, NDC's future assignment of the .WEB registry agreement to Verisign, subject to ICANN's consent.

Afilias initiated an Independent Review Process regarding .WEB (.WEB IRP) in November 2018, alleging that NDC had violated the Guidebook and/or Auction Rules as a result of its arrangement with Verisign and that ICANN had violated the Bylaws by failing to disqualify NDC. NDC and Verisign asked to participate as amici curiae in the IRP, which the Panel granted. The merits hearing took place on 3-11 August 2020, and the IRP Panel issued its Final Declaration on 20 May 2021, which the Panel later corrected for certain typographical errors, effective 15 July 2021.

In the Final Declaration, the IRP Panel, among other things, specifically denied Afilias' requests for: (a) a binding declaration that ICANN must disqualify NDC's bid for .WEB for violating the Guidebook and Auction Rules; and (b) an order directing ICANN to proceed with contracting for .WEB with Afilias. The Panel noted that: "it is for [ICANN], that has the requisite knowledge, expertise, and experience, to pronounce in the first instance on the propriety of the [Domain Acquisition Agreement (DAA)] under the New gTLD Program Rules, and on the question of whether NDC's application should be rejected and its bids at the auction disqualified by reason of its alleged violations of the Guidebook and Auction Rules."

The Panel further declared, among other things, that ICANN had violated its Articles of Incorporation (Articles) and Bylaws by not applying documented policies objectively and fairly in that: (a) ICANN staff did not decide whether the DAA between NDC and Verisign relating to .WEB violated the Guidebook and Auction Rules, and moved forward toward contracting with NDC in June 2018 without first having made that decision; and (b) the ICANN Board did not prevent staff from moving toward contracting in June 2018 or decide whether the DAA violated the Guidebook and Auction Rules once accountability mechanisms had been resolved.

In addition, the Panel issued a non-binding recommendation that ICANN "stay any and all action or decision that would further the delegation of the .WEB gTLD until such time as the [ICANN] Board has considered the opinion of the Panel in this Final Decision, and, in particular (a) considered and pronounced upon the question of whether the DAA complied with the New gTLD Program Rules following [Afilias'] complaints that it violated the Guidebook and Auction Rules and, as the case may be, (b) determined whether by reason of any violation of the Guidebook and Auction Rules, NDC's application for .WEB should be rejected and its bids at the auction disqualified."

Once the Final Declaration became "final," after resolution of Afilias' request for "interpretation and correction" (which the Panel determined was a "frivolous" request) on 21 December 2021, the Board considered the Final Declaration at its 16 January 2022 meeting and adopted the following resolutions:

"[T]he Board acknowledges that the Panel declared the following: (i) Afilias is the prevailing party in the Afilias Domains No. 3 Ltd. v. ICANN Independent Review Process; (ii) ICANN violated its Articles of Incorporation and Bylaws in the manner set forth in the Final Declaration; and (iii) ICANN shall reimburse Afilias the sum of US$450,000 for its legal costs relating to the Emergency Interim Relief proceedings; and (iv) ICANN shall reimburse Afilias the sum of US$479,458.27 for its share of the IRP costs."
"[T]he Board directs the President and CEO, or his designee(s), to take all steps necessary to reimburse Afilias in the amount of US$450,000 in legal fees and US$479,458.27 for its share of the IRP costs in furtherance of the Panel's Final Declaration."
"[F]urther consideration is needed regarding the IRP Panel's non-binding recommendation that ICANN 'stay any and all action or decision that would further the delegation of the .WEB gTLD until such time as the [ICANN] Board has considered the opinion of the Panel in this Final Decision, and, in particular (a) considered and pronounced upon the question of whether the DAA complied with the New gTLD Program Rules following [Afilias'] complaints that it violated the Guidebook and Auction Rules and, as the case may be, (b) determined whether by reason of any violation of the Guidebook and Auction Rules, NDC's application for .WEB should be rejected and its bids at the auction disqualified.'"
"[T]he Board asks the Board Accountability Mechanisms Committee (BAMC) to review, consider, and evaluate the IRP Panel's Final Declaration and recommendation, and to provide the Board with its findings to consider and act upon before the organization takes any further action toward the processing of the .WEB application(s)."
In accordance with the Board's 16 January 2022 resolutions, the BAMC reviewed and considered the IRP Panel's Final Declaration and recommendation, as well as correspondence to the ICANN Board from NDC and Verisign and from Altanovo Domains Limited (formerly Afilias) submitted since the Final Declaration was issued and other relevant materials. The Board also reviewed and considered these same materials, as well as additional correspondence from Altanovo and from NDC and Verisign, as identified in the accompanying Reference Materials.

In the course of the .WEB IRP and through additional correspondence, Afilias has made numerous allegations regarding the DAA between NDC and Verisign, and requested that ICANN disqualify NDC's .WEB application, reject its winning bid, and then recognize Afilias as the winning bidder (which had the second highest bid in the auction). In addition, NDC and Verisign have made numerous allegations through the .WEB IRP and additional correspondence that Afilias violated the Auction Blackout Period, and requested that ICANN therefore disqualify Afilias' .WEB application.

After reviewing the various allegations, IRP materials, and correspondence, the BAMC recommended that the Board take the following next steps relating to the .WEB applications: (a) ask the BAMC to review, consider and evaluate the claims relating to the DAA between NDC and Verisign and the claims relating to Afilias' conduct during the Auction Blackout Period; (b) ask the BAMC to provide the Board with its findings and recommendations as to whether the alleged actions of NDC and/or Afilias warrant disqualification or other consequences, if any, related to any relevant .WEB application; and (c) direct ICANN to continue refraining from contracting for or delegation of .WEB until ICANN has made its determination regarding the .WEB application(s).

The Board agrees with the BAMC's recommendation and notes that, in light of certain of the IRP Panel's determination, it is appropriate and prudent for ICANN to undertake an analysis of the allegations regarding the DAA as well as the allegations regarding the Auction Blackout Period in order to determine if any consequences are warranted with respect to any of the .WEB applications before moving forward with processing NDC's .WEB application, as the prevailing bidder at the auction.

The Board recognizes the importance of this decision and wants to make clear that it takes the results of all ICANN accountability mechanisms very seriously, which is why the BAMC and the Board are carefully considering and formulating the various next steps with regard to the .WEB applications. It is important that ICANN take sufficient time to consider all factors before taking any further action regarding .WEB.

This action is within ICANN's Mission and is in the public interest as it is important to ensure that, in carrying out its Mission, ICANN is accountable to the community for operating within the Articles of Incorporation, Bylaws, and other established procedures. This accountability includes having a process in place by which a person or entity materially and adversely affected by a Board or organization action or inaction may challenge that action or inaction.

Taking this decision is not expected to have a direct financial impact on ICANN. Further review and analysis of the allegations regarding NDC's and Afilias' actions will not have any direct impact on the security, stability or resiliency of the domain name system.

This is an Organizational Administrative function that does not require public comment.