A New Structure for the RIPE NCC:
De Facto Organisational Rules (Revised)
Paul Ridley
Karel Vietsch
Document ID: ripe-161
Date: 8 August 1997
Obsoletes: ripe-156
Obsolete

Table of Contents
    Status
    Scope
    Introduction
    Aims of the New Structure
    Choice of Legal Structure
    1. Bodies
    2. Membership of RNA Bodies
    2.1. RNA and the General Assembly
    2.2. Executive Board
    2.3. Treasury Committee
    2.4. Management Team
    3. Powers of the Bodies
    3.1. General Assembly
    3.2. Executive Board
    3.3. Treasury Committee
    3.4. Management Team
    4. Decision Making
    4.1. General Assembly
    4.2. Executive Board
    4.3. Treasury Committee
    4.4. Management Team
    5. Initial Setup
    5.1. RNA
    5.2. Executive Board
    5.3. RIPE NCC Employees
    Acknowledgements
    Appendix A
    Foundation
    Limited Company
    Limited Partnership
    Offshore Companies Offshore Companies
    Appendix B - Reasoning behind RNA Rules
    Treasury Committee
    Membership in RNA
    Membership in the EB
    Powers of the EB
    Decision Making in the GA

Status

This is the amended version of the RIPE document with the same title
(ripe-156). Any amendments of the original document are made as a result
of input from contributors either given by e-mail or physically at the
RIPE Meeting in Dublin. Due to the overwhelming lack of criticism that
the document's original version has received, the authors feel that it
can now be said that a consensus has been reached, and that this
document, A New Structure for the RIPE NCC: De Facto Organisational
Rules (Revised), will stand as the de facto organisational rules for the
new RIPE NCC.

Scope

This document proposes a structure for the RIPE NCC as of 1 January
1998. The intended audience are the current RIPE NCC contributors, the
members of TERENA and other interested parties. Distribution of this
document is unlimited. Comments to the authors are encouraged.
In addition to this document it is planned to publish three other
documents. The second document published will explain tax issues
together with the worst case and expected case scenarios. These first
two documents will be open to discussion on the RIPE NCC Contributors
mailing list. Once the de facto way of operating has been agreed upon
then further detailed documents can be produced. The first will be the
legal Articles of Association of the RIPE NCC-new. These articles of
association will be the legal way of expressing the de facto way of
operating that has been decided upon. Therefore the third document
should need little discussion. The fourth document to be published will
be a financial plan explaining the financial consequences of the
separation from TERENA.

Introduction

The RIPE NCC performs activities for the benefit of the Internet service
providers (ISPs) in Europe and the surrounding areas; primarily
activities that the ISPs need to organise as a group, although they may
be competing with each other in other areas. The RIPE NCC must therefore
observe strict neutrality and impartiality with respect to individual
service providers. See the document RIPE NCC Activities & Expenditure
1997 (ripe-144) for the detailed 1997 plan.
The RIPE NCC was proposed by RIPE in September 1990 in the document RIPE
Network Coordination Centre (ripe-019). It started operations in April
1992 as a service of the TERENA association (formerly RARE). TERENA is
currently providing the RIPE NCC service to the NCC contributors on the
basis of a formal service agreement.

In the past five years the RIPE NCC, like the Internet, has grown
considerably. The 1997 operating expenses are budgeted at 2 mECU and the
number of permanent staff is expected to exceed 30 by the end of this
year. The RIPE NCC is now significantly larger than all other TERENA
activities put together. In September 1996 it was thus agreed by the
RIPE NCC contributors and TERENA that a split of the RIPE NCC from
TERENA should be looked into. A target date for the start of operations
of RIPE NCC-new was set at 1 January 1998. A three-person committee was
set up to investigate this matter. The committee consisted of Paul
Ridley, Karel Vietsch and Wim Vink.

This committee discussed and came up with a set of requirements that
would have to be met by the new organisational structure if it was to be
acceptable to all three stakeholders: the contributors, TERENA, and the
RIPE NCC staff. After internally discussing possible legal structures
for the RIPE NCC-new it was decided to call in external consultants to
help. Coopers & Lybrand advised on various legal, financial, and
tax-related issues.

Aims of the New Structure

The structure and operating procedures of the RIPE NCC-new organisation
have to be such that they facilitate the achieving of the organisation's
aims. In achieving those aims the RIPE NCC-new will have to satisfy the
criteria of all stakeholders. The respective stakeholder criteria are
the following:

Contributors

- Good service, including neutrality and impartiality.
- A not-for-profit organisation.
- An executive committee which represents the various interests of the
contributors.
- It should be non-exclusive, so that it is open to every potential ISP.
- No contributor, group of contributors or third party should be able to
come into a position from which it may gain control of RIPE NCC, nor
should a hostile takeover be possible.
- It should be subject to as little taxation as possible.
- Any present RIPE NCC financial surplus held at TERENA should be
available to the new entity.
- It should support the credible function of the RIPE NCC as a industry
self-regulation organisation.

TERENA

- The setting up of RIPE NCC-new should not leave TERENA with financial
liabilities.
- TERENA wishes to initially have some say in the running of the RIPE
NCC-new.

RIPE NCC employees

- Employees should maintain their contractual and tax rights.
- The built up RIPE NCC reserves for use if the RIPE NCC should cease
operations should be available to the new entity.

Choice of Legal Structure

During discussions with Coopers & Lybrand many types of organisation
were considered as to their applicability. For reasons outlined in
Appendix A various options were rejected. The option that was found to
be most suitable for the RIPE NCC-new organisation was an association
(vereniging). Under Dutch law an association was considered the most
applicable form due to a combination of tax suitability, its democratic
character, and its ability to resist unwelcome takeovers. The exact
structure and processes of a future RIPE NCC Association, hereafter
known as RNA, will be discussed below. Some of the reasoning behind the
specific rules is summarised in Appendix B.

1. Bodies

RNA has two main bodies, the General Assembly (GA) consisting of all
members and an Executive Board (EB). The weight of power rests with the
GA and it exercises the most important rights within the organisation.
Two other auxiliary organs within the association are the Treasury
Committee (kascommissie) and the Management Team (MT).
The RNA will be advised by the well established informal group of
technical experts known as RIPE (Reseaux IP Europeens). RNA will
establish advisory relationships with other relevant bodies as necessary.

2. Membership in RNA Bodies

2.1. RNA and the General Assembly

Membership in the RNA is open to any legal or natural person satisfying
the following criteria:
1) They have a current RIPE NCC service agreement.
2) They have paid all fees due under that agreement.
3) They do not act contrary to the interests of RNA.
No employee of the RNA is allowed to be a GA member.
All new members will be candidate members for an initial period of six
months. Candidate members have all rights of membership besides voting
rights in the GA.
In addition to having to satisfy the candidate membership period, a new
member must satisfy two further requirements before they are granted
voting rights:
1) No legal entity can own more than 25 local registries. If this new
member brings an entity's number of owned registries above the 25 level,
then the new member is not granted voting rights.
2) The new member must have already used RNA services.
Voting rights in the GA will be suspended as soon and for as long as a
member is in arrears with the payment of fees.
The GA can decide to expel RNA members on proposal of the EB.

2.2. Executive Board

The Executive Board (EB) consists of three to five natural persons
including a chairman and a treasurer. EB members serve on personal
title. Any natural person is eligible for EB membership. No RNA employee
is allowed to be an EB member. The RIPE NCC General Manager, although
non-voting, participates in all EB meetings.

Members of the EB are elected by the GA for terms of three years.
Re-election is possible. The terms are staggered so that in any given
year the terms of no more than half of the EB members expire.
The GA may end the term of an EB member prematurely by an absolute
majority decision. In this case a new EB member will be elected as soon
as possible.

The EB may co-opt natural persons interested to serve on the EB in the
future to fully participate in EB business without voting. A co-opted
person will participate for a period of 6 months, which can be renewed
twice up to a maximum of 18 months. The EB will inform the GA of any
such co-options without delay.

2.3. Treasury Committee

The Treasury Committee (TC) consists of one to three natural persons
appointed by the GA on suggestion of the EB. TC members serve on
personal title. Any natural person is eligible for TC membership. No RNA
employee or EB member is allowed to be a TC member.

2.4. Management Team

The RNA Management Team will be those employees retained by the RNA to
fulfill management functions. At present this would consist of the
General Manager plus the manager of each of the three departments:
administration, engineering and registration services. With the
exception of the General Manager, who is appointed by the EB, all other
members of the MT are appointed by the RIPE NCC General Manager.

3. Powers of the Bodies

The following are the respective powers for the RNA bodies:

3.1. General Assembly

The RNA General Assembly (GA) is empowered to:
amend the Articles of Association;
pass resolution to dissolve the Association if the EB proposes to do so;
appoint and dismiss members of the EB;
adopt the annual accounts, upon advice of the EB and Treasury Committee;
adopt the activity plan and budget, upon proposal from the EB;
adopt the charging scheme, upon proposal from the EB;
discuss and set policies regarding the RIPE NCC services;
select members of the Treasury Committee.

3.2. Executive Board

The RNA Executive Board (EB) is empowered to:
sign contracts in the name of the Association when two EB members act
together;
sell or buy property;
appoint the RIPE NCC General Manager;
delegate powers to the MT.
The Executive Board is explicitly not empowered to:
influence or change any operational decision made by the MT regarding
individual ISPs. Any dispute that an individual ISP may have with an MT
decision can be escalated using the arbitration process described in the
service agreement.

3.3. Treasury Committee

The Treasury Committee is required to:
audit the annual accounts and report to the EB and the GA.

3.4. Management Team

The Management Team (MT) is empowered to:
execute the activities and policies decided upon by the GA;
report all key issues to the EB and the GA;
carry out any other duties as delegated by the EB.

4. Decision Making

The de facto decision making processes are designed to minimise the
influence of geographical location and the ability to attend physical
meetings. Therefore the Internet is used as much as possible in de facto
decision making.
It should be stressed that the de jure (legal) processes will differ
from the de facto (operational) ones described below, because Dutch law
does not provide for electronic decision making. However we are
confident that with the benefit of good legal advice we can define de
jure processes to closely match the intention of the processes defined
below.

4.1. General Assembly

The GA discusses by means of an Internet mailing list or other similar
public forum on the network. The mailing list has closed active
participation (only open to GA members), but the list archives will be
publicly available.
Motions for decisions by the GA can be originated by the EB or 5% of the
GA members.

Decisions by the GA can only be taken after motions have been published
for discussion for a period of four calendar weeks.
Whenever possible the GA works by consensus.
When consensus is not clearly achieved, the GA may take de facto
decisions using appropriate network based voting mechanisms like
authenticated electronic mail. The GA itself has responsibility to
monitor that the mechanisms used are indeed applied as intended in a
correct manner. The MT supports the voting mechanisms of the GA and
keeps appropriate records of votes which can be verified by the GA.
Each member is entitled to either 1, 2, or 3 votes dependent upon the
registry size. A small registry has 1 vote, a medium registry 2 votes,
and a large registry 3 votes.

When voting, decisions are carried by a simple majority of the number of
votes cast. The only exception to this is for the removal of an EB
member for which a 2/3 majority of the number of cast votes is needed.

4.2. Executive Board

The EB discusses by means of a closed Internet mailing list or other
similar public forum on the network. This mailing list will only be open
to GA members.
In addition the EB has physical meetings, the minutes of which will be
published. These meetings are convened by either the EB chair or at the
request of at least 2 members of the EB at least 2 weeks in advance with
a written agenda.
The EB takes de facto decisions with simple majority either by votes at
physical meetings or using appropriate network based voting mechanisms
like authenticated electronic mail.
When voting decisions will be made by a simple majority of the number of
votes cast.

4.3. Treasury Committee

The TC deliberates informally.

4.4. Management Team

The MT deliberates informally.

5. Initial Setup

The creation of an association is always special because initial
membership of all bodies need to be defined. This is not especially
difficult in the case of RNA because a membership base exists and the
only really new important organ is the Executive Board.

5.1. RNA

The initial RNA membership will consist of those members of the RIPE NCC
Contributors Committee who have been using the RIPE NCC services in 1997
and before January 1st 1998 have signed the 1998 RIPE NCC Service
Agreement and fulfilled the membership criteria outlined above.

5.2. Executive Board

The initial EB members will be chosen by a consensus of the RIPE NCC
Contributors Committee before November 1997. A number of initial terms
will be shortened to achieve the staggering of terms specified above.
In recognition of the initial support given by TERENA and in the
interest of continuity for the RIPE NCC, TERENA will be granted the
right to name one member of the EB serving during the first two years of
RNA operation.

In recognition of the financial liabilities still borne by TERENA during
the first year of RNA operations, this EB member will have the right to
veto any EB decisions. The intention of this power is to enable TERENA
to prevent decisions with serious negative financial consequences to
TERENA. This right is not intended to give TERENA a privileged position
in determining the activities of the RIPE NCC or its future direction.
The TERENA-named EB member will notify both the EB and GA as soon as
possible of his intention to exercise this right and justify doing so in
terms of the above stated intention.

5.3. RIPE NCC Employees

The initial employees of the RNA will be those TERENA RIPE NCC employees
employed as at 1 January 1998.

Acknowledgements

The authors wish to acknowledge the professional advice of the Coopers &
Lybrand team. They wish to thank Daniel Karrenberg for his advice and
suggestions.

Appendix A

As mentioned in chapter 4 various legal structure for the RIPE NCC-new
were rejected during the consultancy period with Coopers & Lybrand. In
this Appendix we aim to list which ones were rejected and why.
Foundation (stichting)
In all fiscal respects a foundation, under Dutch law, has the same
benefits and drawbacks as an association. The difference between the two
forms arises in its principal legal structure. A foundation has only one
principal body, the Executive Board (EB) which exercises all power in
the foundation. It may in addition have an advisory board but this has
no decision making powers. It was felt that if the RIPE NCC-new was a
foundation the contributors have little say in practice and even less
legally in RIPE NCC operations. The RIPE NCC would in effect be
controlled by a small group of people who are the EB which is contrary
to the criteria laid down.
Limited Company (besloten vennootschap met beperkte aansprakelijkheid BV)
For tax purposes a limited company is always taxable on any profit made.
This is not necessarily the case with an association. Therefore if a
limited company was chosen the RIPE NCC-new would never have the chance
to avoid paying company tax. In order for contributors to have a legal
say in the running of a limited company they have to be shareholders of
that said company. This could be arranged by treating the annual charges
as buying shares. However we have earlier been informed that certain
contributors would not be able to own shares in a company, and thus
these contributors would not be able to be involved to an equal degree
as others.

Shares would also leave the RIPE NCC vulnerable to a hostile takeover.
Additionally a company, which can be used for profit making purposes may
be less credible as an industry self-regulator. A combination of these
reasons allow for situations to arise that are contrary to the laid down
criteria and thus the form of a limited company has to be rejected.

Limited Partnership

The limited partnership is a complex construction that has as an
advantage that it may reduce a gift tax issue. This gift tax issue will
be discussed in detail in the tax document. A limited partnership would
consist of TERENA as a silent partner (only providing money), and three
new organisations, RIPE NCC association, RIPE NCC BV, and RIPE NCC CV.
The association would work in the same way as that listed in chapter 4
and would be the 100% owner of RIPE NCC BV. The association in exchange
for the profit made would provide its employees to the RIPE NCC CV which
would carry out the day to day work, and collect the charges. Qua
decision making this would be no different than a normal association
i.e. the contributors would have overall say, since the RIPE NCC
association is the controlling partner of the four. The construction is
however far more complex than a simple association and thus would bring
extra administrative costs and provide a confusing picture for outside
parties. Therefore for lower costs and simplicity an association is
preferred unless tax issues demand that a limited partnership be looked
at in more detail.

Offshore Companies

The possibility of setting up a company offshore to avoid paying company
tax was discussed with Coopers & Lybrand. It is possible to do but in
their opinion the costs, both initial and long term administrative would
be high. This option is not however ruled out but it is thought sensible
to first explore the possibilities of reaching an acceptable agreement
with the Dutch tax authorities. If an agreement can be reached then
there is no need to go offshore. If however no acceptable agreement can
be reached then the offshore option will have to be explored in more
detail.

Appendix B - Reasoning behind RNA Rules

This appendix tries to summarise some of the reasoning behind the rules
for RNA which is not appropriate to be written up with the rules
themselves. This will be amended and expanded as suggested by questions
and discussion from the community.

Treasury Committee

The Treasury Committee is an institution due to Dutch law. The intention
is to force the members of an association to ensure yearly review of the
financial position of the association in a way independent from the EB.
Membership in the RNA

De facto membership in the RNA will be a result of entering into the
RIPE NCC Service Agreement. The intent is that everyone becomes a member
and thus represented in the GA. We have had some rare cases where it was
difficult for legal entities under some jurisdictions to become a member
of a Dutch association. For them it will be possible to opt out of
membership while still receiving RIPE NCC services.

Candidate membership is introduced to prevent a situation where a large
number of persons/legal bodies signs the RIPE NCC Service Agreement with
the sole purpose of influencing an impending RNA decision and no
intention to operate a Local IR or even to pay the service fees. Another
beneficial effect is that new members have the opportunity to get
familiar with the issues and the style of discourse before being able to
vote.

The aim of the extra voting restrictions, i.e. limiting the number of
voting members that any legal entity can own, and ensuring that only
those members who have already used RNA services can vote, is twofold.
Firstly by limiting the number of voting members that one organisation
owns, a hostile takeover is largely prevented. However there are flaws
in this theory since it is difficult to enforce. Therefore the issuing
of voting rights only to those members who have used RNA services,
ensures that only those members who are serious enough about setting up
a network that they have satisfied the criteria needed to receive RNA
services, can vote.

Membership in the EB

The size of the EB is a trade-off between ensuring it is small enough to
work effectively as a group and large enough to adequately represent the
membership. We believe the numbers chosen are a good trade-off
considering that there may be co-opted members.
Likewise the length of terms is a trade-off between continuity and renewal.

The concept of co-opted non-voting members is a trade-off between
introducing a somewhat self-perpetuating process and ensuring that the
EB consists of serious and capable people with a stable commitment. Note
that having served as a co-opted member is consciously not a requirement
to be elected to the EB. Of course we expect that the GA would consider
the commitment and capabilities demonstrated by co-opted EB members.

Powers of the EB

The powers of the EB specifically do *NOT* include the power to
influence or change any operational decision made by the MT regarding an
individual ISP. This is designed to preserve the important credence of
impartiality and confidentiality that the RIPE NCC enjoys. It is
reasoned that if an EB member has full access to information and could
influence a decision regarding an individual ISP who may be a
competitor, then this credence of impartiality and confidentiality would
be damaged.

In order to protect the EB members from charges of irresponsible
governance they should ensure that a full arbitration procedure is in
place, should any individual ISP contest an operational decision by the
MT. This arbitration procedure should be agreed to by the GA and be a
part of the service agreement. The EB members would at no time be a part
of the arbitration process, but would ensure that proceedings are
conducted in a responsible manner.

Decision Making in the GA

The mechanisms for electronic voting have deliberately not been
described in details as technology may change. Currently some form of
authenticated mail is probably appropriate. Authentication mechanisms
can be varied according to the GA member's wishes and can range from
consistency checks of mail headers via agreed clear text passwords to
public key cryptography. It is probably appropriate for the GA to select
a group of people supervising electronic voting if it is used.
For operational effectiveness a simple majority of votes cast was
thought sufficient to make decisions. The only circumstance that was
thought serious enough to warrant the necessity of a 2/3 majority of the
number of votes cast was the removal of an EB member. Needing a 2/3
majority means that the overwhelming majority must be behind the
decision and snap decisions are avoided.


