Dechert Secures Another Victory Against ICANN in .WEB Arbitration

June 09, 2021

Dechert has secured another victory against the Internet Corporation for Assigned Names and Numbers (ICANN), the entity responsible for coordinating the Internet Domain Name System.

On May 20, 2021, a panel constituted under ICANN’s Bylaws and the International Arbitration Rules of the American Arbitration Association’s International Centre for Dispute Resolution (ICDR) unanimously determined that ICANN failed to act fairly, objectively and transparently in addressing Afilias Domains No. 3 Limited’s (now known as Altanovo Domains Limited) (Afilias) complaints that VeriSign, Inc. (Verisign) attempted to circumvent ICANN’s rules in seeking the right to operate .WEB—often considered the Internet domain best positioned to compete against .COM, which is currently operated by Verisign. ICANN made the decision public on May 25.

In 2012, seven applicants—including Afilias and Nu DotCo, LLC (NDC)—applied to run the .WEB gTLD registry as part of ICANN’s New gTLD Program. Verisign was not among the seven applicants. In July 2016, after an ICANN screening process that also mandated a public notice period to allow members of the Internet community to comment on each of the applicants and their applications, the seven applicants participated in an auction to determine which of them would be granted the .WEB registry rights. NDC submitted the highest bid, secretly being directed by Verisign and using Verisign’s funds to secure the .WEB registry rights for Verisign.

Following the auction, Verisign disclosed that it had participated in the auction and had secured the rights to .WEB through an agreement it had concluded with NDC in 2015 (the Domain Acquisition Agreement). Contrary to ICANN’s published rules, this agreement was not disclosed to ICANN at the time NDC and Verisign entered into it. And even though, precipitated by Afilias’ complaints, ICANN obtained it from Verisign in August 2016, it was not disclosed to the Internet community.

Afilias only received the NDC-Verisign Domain Acquisition Agreement in December 2018 after an ICDR arbitrator ordered ICANN to disclose it to Afilias. Verisign and NDC have continued to insist that ICANN not make the Domain Acquisition Agreement public.

Immediately following Verisign’s announcement that it would be acquiring .WEB based on the auction outcome, Afilias asked ICANN to investigate the matter. ICANN proceeded to do so, but in a manner that was clearly intended to favor NDC and Versign. In September 2018, ICANN issued a questionnaire to Afilias, NDC and Verisign, which was based on the Domain Acquisition Agreement, but did not disclose this to Afilias. ICANN was essentially asking questions of Afilias to which it already knew the answers, and which it knew that Afilias would not be able to answer comprehensively because it was not in possession of the Domain Acquisition Agreement. Verisign and NDC, however, were able to provide fully-informed responses. ICANN’s lack of transparency and bias and in favor of Verisign did not stop there.

In November 2016, according to ICANN, its Board determined at a “Board workshop” that it would delay consideration of Afilias’ concerns about .WEB until after a separate dispute between ICANN and a Donuts subsidiary, Ruby Glen, LLC, involving .WEB had concluded. ICANN did not notify Afilias of this decision.

By June 2018, the Ruby Glen dispute had been over for several months. Afilias was still waiting for the results of ICANN’s investigation. Yet, despite numerous inquiries, it was told nothing. But as would become apparent in the course of the ICDR arbitration, starting in early 2018, ICANN Staff had commenced the process for delegating the .WEB gTLD registry to NDC and hence to Verisign. Even though the Board was aware of the steps ICANN Staff was taking, and notwithstanding the decision it had apparently taken in November 2016, ICANN’s Board took no steps to intervene. To force a suspension of the delegation process, Afilias was forced to immediately invoke ICANN’s accountability mechanisms and to invoke arbitration against ICANN.

In the ICDR proceedings, Afilias contended that, among other claims, ICANN violated its Articles of Incorporation and Bylaws by beginning the delegation process for the .WEB gTLD before concluding an investigation of NDC’s conduct; by failing to disqualify NDC for flagrantly violating the New gTLD Program’s Rules by entering into a secret agreement with Verisign; and by acting without transparency, as ICANN did not disclose the determination allegedly made by its Board in November 2016 to delay consideration of Afilias’ concerns.

Following a three-year, multimillion arbitration and a week-long virtual hearing, involving extensive cross-examinations of ICANN’s, Verisign’s and NDC’s witnesses, the ICDR Panel found that ICANN had breached its Articles and Bylaws in numerous ways – including by failing to decide whether the Domain Acquisition Agreement breached the New gTLD Program Rules, by failing to prevent ICANN Staff from beginning the delegation process for .WEB in June 2018, and by failing to inform Afilias about the November 2016 ICANN Board meeting.

The ICDR Panel has directed ICANN’s Board to conduct an objective and fair review of Afilias’ complaints, consider whether NDC violated ICANN’s rules and what the consequences should be if a determination of illegality is made. The Panel also awarded Afilias a significant portion of its costs and fees as the prevailing party in the proceedings. 

This victory represents Dechert partner Arif H. Ali’s fourth straight victory against ICANN (ICM Registry v. ICANNDotConnect Africa Trust v. ICANN, and Dot Registry, LLC v. ICANN). 

The Dechert team advising Affilias includes international arbitration partners Arif H. Ali and Alexandre de Gramont; associates Rose Marie Wong, Tamar Sarjveladze, David Attanasio, Michael Losco and Michael Corcoran; and senior paralegal Anna Avilés-Alfaro.

Case Caption: Afilias Domains No. 3 Limited (Afilias) v. Internet Corporation for Assigned Names and Numbers (ICANN), ICDR Case No. 01-18-0004-2702

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Dechert is a leading global law firm with 24 offices around the world. We advise on matters and transactions of the greatest complexity, bringing energy, creativity and efficient management of legal issues to deliver commercial and practical advice for clients.

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