On the Issue of “Jurisdiction” over ICANN

By now readers of this blog know, the United States is in the midst of a transition that will, when completed, give up its contractual control of the Internet Assigned Numbers Authority (IANA).  That authority is currently conducted by the Internet Corporation for Assigned Names and Numbers (ICANN) under contract to the Department of Commerce.  Current plans are for Commerce to end the contract in September 2015, and let ICANN manage the IANA function on its own.  Some, including me, favor the transition but are concerned that it will occur without an increase in accountability and transparency at ICANN.  My colleague, Jack Goldsmith, generically shares that concern.   So does the US Congress. Hence, there is an interest in making sure that when the transition occurs, Commerce imposes conditions that guarantee ICANN’s continued openness and independence. As part of my ongoing interest in the issue, I have joined the “Cross-Community Working Group – Accountability.” As its name implies, this is a group of those who are part of the ICANN community – registrars, registries, commercial users and non-commercial users, among others – who have been chartered to define the accountability mechanisms that need to be adopted by ICANN to safeguard it from capture by governments or the bureaucracy of ICANN itself. I attended a recent meeting of the CCWG that occurred in Istanbul, where much good work was done. Most notably, the group has generally reached consensus that ICANN needs a narrowly focused mission statement that confines it to a limited scope of activities and that it needs to also create an Independent Review Panel with arbitral authority to confine ICANN to the mission as defined. If ICANN does both of those things it will go a long way to ensuring accountability and maintaining internet freedom. I wanted, however, in this blog post to discuss one of the more difficult and, to my mind, troubling side issues that has arisen in the CCWG -- one that will be of interest to national security lawyers in America: the question of “jurisdiction.” The phrase is a bit of misnomer since by “jurisdiction” the CCWG means a host of related, but distinct things – where ICANN can be sued; what laws apply to disputes involving ICANN and its customers/users; and where ICANN is incorporated. It is only the last of these that generates controversy – but boy does it generate controversy. Where We Are Now For context, it is useful to understand the current state of play. ICANN was incorporated as a non-profit corporation under California law. Its first Chief Technology Officer was going to be Jon Postel, one of the scientists who more or less invented the network science that undergirds the internet today. It seems pretty clear, in retrospect, that California was chosen as a matter of convenience, because that is where Postel was working, and ICANN’s headquarters were going to be co-located with his office at USC, rather than for any specific reason related to a jurisdictional preference. This jurisdiction of incorporation later became part of ICANN’s promise to the Department of Commerce in its “Affirmation of Commitments” (a sort of “bill of rights” for the Internet). Among many promises related to multi-stakeholder process and the maintenance of internet freedom, ICANN also committed to “remain a not for profit corporation, headquartered in the United States of America with offices around the world to meet the needs of a global community.” [It is worth noting for the legally minded among us that a requirement to remain “headquartered” in the US is not precisely the same as a requirement to remain “incorporated” in the US. Indeed, many companies are incorporated in one location (e.g. Delaware) but headquartered elsewhere.] When he testified before the US Senate earlier this month, the ICANN CEO partially reiterated that commitment, saying that ICANN has “no plans” to terminate its obligations under the Affirmation of Commitments. He reiterated that more directly in his oral testimony when he said: “ICANN has its global headquarters in the United States, and there are no plans for that to change.” Savvy readers will, of course, also notice that “no plans to change” is not quite the same as saying “we will not change” but will, nonetheless get a sense of commitment. Where We Might Go Nevertheless, there are some in the CCWG who wish the group to consider whether or not as part of the transition ICANN should refuse to commit to remaining incorporated in the United States. The suggestion that such a commitment should =not= be made is, unsurprisingly, being principally pushed by the Brazilian government’s representative to the CCWG. It’s useful at this point to ask why such a move might be considered. There are, of course, several possible legal reasons:

• It might be that California law restricts the corporate governance of ICANN in ways that would frustrate enhanced accountability.
• It might be that incorporation was problematic because it subjected ICANN to the personal jurisdiction of American courts.
• Or, it might be that incorporation in California brought with it the application of problematic California (or American) substantive legal requirements.

It turns out, however, that none of these facially neutral reasons for wanting to move ICANN headquarters from California really holds much water: As to limitations on corporate governance, the CCGW has hired a law firm (Sidley & Austin) to review legal questions related to the transition. Their conclusion was simple: “The stated goals and concerns can be achieved under ICANN’s current status as a California nonprofit public benefit corporation. While other legal structures and entity types are available, including a mutual benefit corporation, a benefit corporation, a limited liability company, a partnership or an unincorporated association, these structures and entity types do not provide any clear benefits with respect to accountability mechanisms over what can be achieved using ICANN’s current legal entity structure. Regarding personal jurisdiction over ICANN, it seems highly likely (given the International Shoe doctrine) that ICANN will remain subject to the personal jurisdiction of US courts so long as it does significant business in the United States. And, of course, it seems undeniable that ICANN will continue to do business in America even if it is incorporated in another country – much as BMW does business here in the US and is subject to American in personam jurisdiction. Indeed, if one were to push on the ambiguity in the Affirmation and reincorporate ICANN elsewhere but retain its headquarters in the US the jurisdiction of US courts over ICANN would be clear. It is also worth noting that the reciprocal view is certainly also true – ICANN is also already subject to the personal jurisdiction of courts around the globe in all of the countries where it does significant business or where it has a legal presence. This will include many nations in the world, including some whose legal systems are less well developed than in California. The third concern – with the substance of California law – is of even less real significance, it seems to me. The applicable substantive law can, and will be, determined by contract rather than incorporation. ICANN is, primarily, a creature of contracts and obligations. It signs agreements with those who operate top-level domains and those agreements are enforceable in courts of law. But as with most contract, the parties are free to specify both where the enforcement may occur and what law applies. It so happens that for the most part ICANN specifies California law as the applicable law – but it could just as easily specify arbitration in London under English law if it wished (and as it has in some cases already). In short, the choice of law issue is independent of the place of incorporation – at least as far as I can see. What To Think? So, why then, is there resistance in the CCWG to affirming that ICANN will remain headquartered in California? I can think of only two reasons, neither terribly worthy of the lofty ambitions of ICANN or the CCWG. First, it might be that some see incorporation in California as symbolic of American hegemony. While conceding the political salience of that view, it seems to me that it is really little more than latent anti-Americanism masquerading as concern for global perception. Put another way if moving ICANN from the US is a political “scalp” that some other nations want to take during the transition it is perfectly legitimate for the US to resist the taking of that scalp on equally political grounds. Second, the Machiavellian in me sees the incorporation discussion as a poison pill. It seems highly likely that the Administration and/or Congress will insist on ICANN remaining incorporated in the United States. The requirement is, after all, already in the Affirmation of Commitments. There might be some who would like to see the transition fail – and fail in a way in which it could be portrayed that American intransigence is the cause of the failure. In any event, the issue having been broached I think it must be addressed. It might have been that ICANN’s transition proposal could “stand silent” on the question of incorporation venue – leaving the future deliberately ambiguous. As it stands now, however, I think silence will not be accepted – both the Administration and Congress will insist on an answer to the question from ICANN. And in that regard, if the CCWG were being practical, it would be obliged to acknowledge that ICANN’s place of incorporation is not terribly relevant to its mandate of enhancing ICANNs accountability. Perhaps more importantly, all of the accountability work currently under way assumes that the mechanisms and reforms will be based on California law. If that’s subject to change in the near future because ICANN moves its place of incorporation, that will throw all the current work (potentially) out the window, or at least raise questions of instability and possible capture. In the end, the place of incorporation is relevant almost exclusively to the symbolism of the institution. In my view, the US has, to be sure, not been a perfect steward of internet freedom, but it has been a reasonably successful one. Others see political value in contesting that conclusion and I expect it will be the subject of significant debate in the coming months. Meanwhile, we might end this discussion by musing as to alternatives. If ICANN were not incorporated in California (and assuming, for arguments sake, that it will not reincorporate in Delaware) where might it be located. On that score, we can only judge ICANN by its current actions – and they are less than fully promising. ICANN has two hub offices outside of America – one in Turkey and one in Singapore. Neither of these is particularly known as a bastion of free expression. To the contrary, just the other day, Turkey blocked Twitter and YouTube. The Singaporean Media Development Authority has, likewise, a history of censoring the Internet. Presumably, ICANN might reincorporate in a neutral country like Switzerland or Sweden where the rule of law and internet freedom might flourish, but on current evidence there is no reason to think that would be the end-state result.