Press Release

Afilias prevails in .WEB arbitration:

Panel rules that ICANN Staff and Board breached ICANN’s Bylaws by treating Afilias unfairly and by failing to disclose secret Verisign deal

Dublin, Ireland May 26, 2021– An Independent Review Process (IRP) Panel in Afilias Domains No. 3 Limited (Afilias) v. Internet Corporation for Assigned Names and Numbers (ICANN), ICDR Case No. 01-18-0004-2702, has unanimously determined that ICANN violated its Articles of Incorporation and Bylaws by not acting fairly and transparently in addressing Afilias’ multiple complaints about VeriSign, Inc.’s (Verisign) attempt to circumvent ICANN’s rules for applying for the rights to operate the registry for .WEB—often considered the Internet generic top-level domain (gTLD) most likely to challenge Verisign’s .COM/.NET monopoly. The Panel’s key ruling states: (Complete redacted ruling here)

In the opinion of the Panel, [Afilias] is entitled to a declaration that [ICANN] violated its Articles and Bylaws . . . and to being designated the prevailing party in respect to the liability portion of its core claims.

ICANN’s Articles and Bylaws require the organization to “carry[…] out its activities in conformity with relevant principles of international law and international conventions and applicable local law and through open and transparent processes that enable competition and open entry in Internet-related markets.” The Bylaws also require ICANN to “[m]ake decisions by applying documented policies consistently, neutrally, objectively, and fairly, without singling out any particular party for discriminatory treatment (i.e., making an unjustified prejudicial distinction between or among different parties).” The documented policies include ICANN’s specific rules for the delegation of new gTLDs (New gTLD Program Rules), including application procedures, auction rules for deciding competing applications, and disclosure requirements.

The IRP is an international arbitration process established by ICANN’s Bylaws and administered under the rules of the American Arbitration Association’s International Centre for Dispute Resolution (ICDR) for the purposes of resolving disputes between ICANN and members of the global Internet community. Decisions by an IRP Panel are final and binding on ICANN.

In 2012, seven applicants—including Afilias (now Altanovo Domains Limited) and a shell company called Nu DotCo, LLC (NDC)—applied to run the .WEB gTLD registry as part of ICANN’s New gTLD Program. Verisign did not to submit an application. In July 2016, after being screened by ICANN, the seven applicants participated in an ICANN-administered auction to determine which of them would be granted the .WEB registry rights. NDC prevailed in the auction with a winning bid in excess of $135 million. NDC did not bid with its own funds, but instead with Verisign’s and for Verisign’s benefit.

Following the conclusion of the .WEB auction, Verisign disclosed that it had participated indirectly in the auction and had secured the rights to .WEB through NDC. Afilias immediately asked ICANN to investigate and take action. Rather than pursuing the matter formally in writing, ICANN’s lawyers contacted Verisign’s litigation counsel by phone, following which Verisign provided ICANN with the “Domain Acquisition Agreement” (DAA) it had concluded with NDC in 2015. Neither NDC nor Verisign had notified ICANN of the DAA when they entered into the agreement, or made any mention of it when ICANN had investigated rumors of VeriSign’s possible involvement with NDC just prior the .WEB auction. Even though it was Afilias that had asked ICANN to investigate the matter, ICANN did not disclose to Afilias that it had received the DAA from Verisign, or even confirm its existence. ICANN would not do so until ordered by an ICDR arbitrator to provide the agreement to Afilias.

ICANN’s lack of transparency did not end with its decision to withhold disclosure of the DAA. In November 2016, ICANN’s Board received a briefing from ICANN Staff and outside counsel on the complaints raised by Afilias and others about ICANN’s handling of .WEB. The Board, however, decided to defer consideration of the issue. This decision was not communicated to Afilias, and Afilias would not learn about it until June 2020, just a few weeks before the final hearing before the IRP Panel. In spite of the Board’s deferral decision, and Afilias’ pending complaint, beginning in early 2018, ICANN Staff commenced the process to conclude a .WEB registry agreement with NDC. This decision also was not communicated to Afilias.

In November 2018, Afilias initiated an IRP against ICANN, after learning that ICANN would be taking the final steps to complete the delegation of .WEB to NDC. Following a three-year, multi-million dollar arbitration, in which Verisign and NDC—with ICANN’s facilitation and assistance—were also permitted to participate in the proceedings as amici, the IRP Panel found that ICANN breached its Articles and Bylaws in numerous ways.

The Panel noted that ICANN “adopted contradictory positions, including in these proceedings, that at least in appearance undermine the impartiality of its processes.” It further found that, in investigating NDC’s and Verisign’s conduct, ICANN “violated [its] commitment, under the Bylaws, to operate in an open and transparent manner and consistent with procedures designed to ensure fairness.” With respect to the Board’s November 2016 deferral decision, the Panel found:

[T]hat it was a violation of the commitment to operate in an open and transparent manner consistent with procedures to ensure fairness, for [ICANN] to have failed to communicate the Board’s decision to [Afilias]. As noted already, [ICANN] had clearly represented in its letters of 16 and 30 September 2016 that it would evaluate the issues raised in connection with NDC’s application and auction bids for .WEB. Since the Board’s decision to defer consideration of these issues contradicted [ICANN’s] representations, it was incumbent upon [ICANN] to communicate that decision to [Afilias].

Regarding ICANN’s June 2018 decision to proceed with the final delegation steps the Panel found that:

A necessary implication of [ICANN’s] decision to proceed with the delegation of .WEB to NDC in June 2018 was some implicit finding that NDC was not in breach of the New gTLD Program Rules and, by way of consequence, the implicit rejection of [Afilias’] allegations of non-compliance with the Guidebook and Auction Rules.

The Panel accordingly found that ICANN had not enforced the New gTLD Program Rules objectively or fairly:

In sum, the Panel finds that it was inconsistent with the representations made to the Claimant by ICANN’s Staff, and the rationale for the Board’s decision in November 2016, to defer consideration of the issues raised in relation to NDC’s application for .WEB, for [ICANN’s] Staff, to the knowledge of [ICANN’s] Board, to proceed to delegation. . . . The Panel finds that in so doing, [ICANN] has violated its commitment to make decisions by applying documented policies objectively and fairly.

John Kane, Altanovo’s Vice President said “After a long, hard-fought and expensive arbitration, we have thus far prevailed. We trust that ICANN’s Board will now do the right thing by evaluating what NDC and VeriSign did objectively and fairly, as the arbitrators have directed, and will disqualify NDC’s application for .WEB. We will of course continue to monitor the process and take all actions necessary to protect our rights in this matter.”

The Panel has remanded determination of Afilias’ complaints back to ICANN’s Board, noting both that ICANN has an “obligation to enforce the New gTLD Program Rules objectively and fairly” and that ICANN’s eventual decision in this regard will be “subject to review by an IRP Panel.”

Altanovo Domains Limited, formerly named Afilias Domains No. 3 Limited, is an Irish limited liability corporation established in 2012 to apply for the right to run the .WEB registry. Altanovo Domains Limited is a subsidiary of Altanovo, Inc., a mobile software and registrar business incorporated in Delaware.

ICANN’s, Afilias’, VeriSign’s and NDC’s written submissions in the IRP, a redacted version of the IRP Panel’s decision, and redacted versions of the final evidentiary hearing transcripts can be found here.