____________________________________________________
A New Structure
for the
RIPE NCC
De-Facto Organisational Rules (Revised)
Paul Ridley
Karel Vietsch
Document: ripe-161
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A New Structure for the RIPE NCC
De-Facto Organisational Rules (Revised)
Ridley, Vietsch
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Status
This is the amended version of ripe-156. Any amend-
ments 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 ripe-156 has
received the authors feel that it can now be said
that a consensus has been reached, and that this
document ripe-161 will stand as the de-facto organi-
sational rules for the new RIPE NCC.
Scope
This document proposes a structure for the RIPE NCC
as of January 1st 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 pub-
lish 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 operat-
ing 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 separa-
tion 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 document ripe-144 for the detailed
1997 activity plan.
The RIPE NCC was proposed by RIPE in 1990 in docu-
ment ripe-019. It started operations in April 1992
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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 Inter-
net, 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 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 for NCC-new was set at
01-01-98. 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, finan-
cial, and tax related issues.
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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 impar-
tiality
* 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 NCC financial surplus held at TER-
ENA should be available to the new entity.
* It should support the credible function of the
RIPE NCC as a industry self-regulation organi-
sation.
TERENA
* The setting up of RIPE NCC-new should not leave
TERENA with financial liabilities.
* TERENA wishes to initialy have some say in the
running of RIPE NCC-new
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RIPE NCC employees
* Employees should maintain their contractual and
tax rights.
* The built up NCC reserves for use if the 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 applica-
bility. 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 demo-
cratic character, and its ability to resist unwel-
come takeovers. The exact structure and processes
of a future RIPE NCC association, hereafter known as
RNA, will be discussed below. Some of the reason-
ing 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 (kascom-
missie) 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 neces-
sary.
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2. Membership of RNA Bodies
2.1. RNA and the General Assembly
Membership of 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 any fees due to 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 mem-
bership 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 reg-
istries. 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 ser-
vices.
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.
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2.2. Executive Board
The executive board (EB) consists of 3-5 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 such 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) is consists of 1-3 natu-
ral persons appointed by the GA on suggestion of the
EB. TC members serve on personal title. Any natu-
ral 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 ser-
vices. With the exception of the general manger,
who is appointed by the EB, all other members of the
MT are appointed by the NCC general manager.
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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 pro-
posal from EB
* adopt the charging scheme, upon proposal from
EB
* discuss and set policies regarding the RIPE NCC
services
* select the Treasury committee
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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 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 arbitra-
tion process described in the service agree-
ment.
3.3. Treasury Committee
The treasury committee is required to:
* audit the annual accounts and report to the EB
and 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
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4. Decision Making
The de-facto decision making processes are designed
to minimise the influence of geographical location
and the ability of 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) pro-
cesses 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.
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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 publically 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 4
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 elec-
tronic 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 appropri-
ate 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 un-election of an EB
member for which a 2/3 majority of the number of
cast votes is needed.
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4.2. Executive Board
The EB discusses by means of a closed Internet mail-
ing list or other similar public forum on the net-
work. This mailing list will only be open to GA mem-
bers.
In addition the EB has physical meetings, the min-
utes 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 appro-
priate network based voting mechanisms like authen-
ticated 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 fulfill the membership
criteria outlined above.
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5.2. Executive Board
The initial EB members will be chosen by a consensus
of the 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 TER-
ENA and in the interest of continuity for the 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 opera-
tions, 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 neg-
ative financial consequences to TERENA. This right
is not intended to give TERENA a privileged position
in determining the activities of the 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 TER-
ENA RIPE NCC employees employed on Jan 1st 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 sugges-
tions.
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Appendix A
As mentioned in chapter 4 various legal structure
for the RIPE NCC-new were rejected during the con-
sultancy 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 asso-
ciation. The difference between the two forms arises
in its principle legal structure. A foundation has
only one principle 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 lit-
tle say in practice and even less legally in RIPE
NCC operations. The NCC would in effect be con-
trolled by a small group of people who are the EB
which is contrary to the criteria laid down.
Limited Company (besloten venootschap met beperkte aansprakeli-
jkheid 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 con-
trary to the laid down criteria and thus the form of
a limited company has to be rejected.
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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
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 pos-
sibilities 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.
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Appendix B - Reasoning behind RNA Rules
This appendix tries to summarise some of the reason-
ing behind the rules for RNA which is not appropri-
ate 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 finan-
cial position of the association in a way indepen-
dent from the EB.
Membership in RNA
De-facto membership of 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 associa-
tion. For them it will be possible to opt out of
membership while still receiving RIPE NCC services.
Candidate membership is introduced to prevent a sit-
uation where a large number of persons/legal bodies
signs the NCC service agreement with the sole pur-
pose 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. lim-
iting the number of voting members that any legal
entity can own, and ensuring that only that members
who have already used RNA services can vote, is two
fold. Firstly by limiting the number of voting mem-
bers 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 set-
ting up a network that they have satisfied the cri-
teria needed to receive RNA services, can vote.
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Membership in EB
The size of the EB is a tradeoff 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 tradeoff
considering that there may be co-opted members.
Likewise the length of terms is a tradeoff between
continuity and renewal.
The concept of co-opted non-voting members is a
tradeoff between introducing a somewhat self-perpet-
uating 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 con-
sciously 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 endure that proceed-
ings are conducted in a responsible manner.
Decision Making in GA
The mechanisms for electronic voting have deliber-
ately not been described in details as technology
may change. Currently some form of authenticated
mail is probably appropriate. Authentication mecha-
nisms can be varied according to the GA member's
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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 elec-
tronic 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 un-electing of an
EB member. Needing a 2/3 majority means that the
overwhelming majority must be behind the decision
and snap decisions are avoided. Env: start End env
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