Original URL: http://www.theregister.co.uk/2008/04/24/nominet_elections_battle/

UK net registry battles coup d'etat

The power struggle at the heart of Nominet

By Christopher Williams

Posted in Law, 24th April 2008 08:02 GMT

Updated Nominet, the not-for-profit registry for .co.uk web addresses, is facing an attempted coup by a group of members who want to force its bosses to hand back millions of pounds in surplus fees.

The company took the rearguard step on Monday of writing to all its 3,000 members encouraging them to turn out to vote in ongoing elections for two non-executive board members. The official communication (pdf) goes as far as campaigning against the three would-be usurpers: Darren Brown, Jim Davies, and Robert Fox.

The results of the postal and online ballot will be revealed at Nominet's AGM on 30 May. In a telephone interview today, Fox described Nominet's campaign as "outrageous". "I don't know whether to laugh or cry. It's certainly entertaining," he said.

A Fox and Brown-backed website set up to counter Nominet's campaign, states: "Nominet are actively telephone canvassing the membership now asking them to vote in favour of the resolution by voting online, or return their postal vote. Nominet employees have been instructed to ask members 'can we rely on your support?' Some people are uncomfortable with the organisation canvassing in this way.

"They see us as people who want to break Nominet, but that's just not true; we want to preserve it. But they're really panicking."

He rejected any suggestion of a conspiracy, saying: "I only spoke to Jim Davies for the first time yesterday. Darren is an old friend of mine."

Victory for the trio would effectively mean they could block board decisions and push for price cuts and for the millions of pounds held in surplus to be paid back. the current board would like very much to maintain the status quo.

The spooked Nominet executive provoked anger from some members with a proposal made even before the rebels decided to stand for election. It is pushing new rules (via "special resolution 6") granting it powers to appoint two extra non-executive directors. Detractors believe it plans to squash opposition by appointing patsies to counter any rebellious member-elected directors.

Fox said it was actually opposition to special resolution 6 that prompted him and Brown "to get off our arses".

If passed, opponents argue that special resolution 6 would grant autocratic power to the current ruling group. The board replies that the appointees would be independent, elected, and that it is duty-bound to ensure that Nominet is governed by qualified people.

"They [our opponents] are effectively saying they disagree with the idea of independent directors," the company's chief executive Lesley Cowley charged yesterday. "We are legally obliged to ensure the right level of skills and experience on the board."

Nevertheless, she believes that the Nominet board's current structure "does make [it] vulnerable to capture". She said the organisation's role fostering the development of the UK internet needs to be safeguarded.

The fear of a coup d'etat by domainers or others has led the executive to engage in some fairly political tactics to mobilise its supporters. The "urgent call to action" challenges Brown, Davies, and Fox to reveal more about their records in the domain business ahead of the election. The three board-friendly candidates have all released details in addition to their initial election statements.

Nominet supporters say that among other historical nuggets, the board is trying to draw attention to the fact that Robert Fox stood for election at the height of the dotcom boom on a platform of turning Nominet into a for-profit venture.

He told The Register: "That was eight or nine years ago. I stand by my current statement that Nominet does a bloody good job. However, they're making stacks and stacks of money, and I'd like them to make less money."

Nominet's surplus currently stands at about £15m. Earlier this year it announced that £5m had been allocated as the seed funding for a new foundation that will give charity to internet causes it deems worthy. Fox said: "I have no problem with the Nominet Foundation in principle, but the size of that donation is outrageous."

Jim Davies, meanwhile, lost a court case in 2005 against the bank Citigroup, which accused his firm Global Projects Management of cybersquatting. Mr Justice Park told the High Court he was an "opportunist" who gave evidence that was "palpable nonsense". Davies could not be reached for comment.

Davies, Brown, and Fox are all standing on an apparently populist platform that could see some of the Nominet fortune returned to members. The current board has obtained a legal opinion (pdf) from a leading corporate governance QC that details significant difficulties with a rebate.

Fox countered: "I'm not convinced that this is impossible. It needs to be looked at carefully. What absolutely is possible is to cut the prices [for domain names]."

Sebastien Lahtinen, one of the non-executive directors standing against the rebellion, said: "It's not, I think, that the board is against prices cuts, but that is something that has to be decided by the membership. Nominet is unusual for a company in that it can't actually set its own prices."

Defenders of the registry's not-for-profit status and war chest say that it provided key stability and security during the technology industry downturn following the dotcom bust. Others reckon it could be a little smaller without any negative impact.

Cowley said unlike the existing board, the trio do not have the best interests of the Nominet membership or the UK internet in mind, rather their own bottom lines. "It is quite difficult to reconcile that when you have been elected to represent the entire membership," she said.

How could such key part of the UK's internet infrastructure become the subject of a unseemly power struggle? Nominet was set up like a mutual society with the expectation that its members would be engaged in its activities, but it hasn't turned out like that. Now that its membership numbers in the thousands, typical election turnouts are less than 10 per cent. This, claims Cowley, is the reason it is "vulnerable to capture", and the main reason the board wrote to members this week.

She rejected a suggestion that the problem is of Nominet's own making, however. "We have run workshops and all sorts to try to get people involved," the chief executive said. "We have had growing concerns about participation - this is not just a new thing this week. Our concern is that when you have less than 10 per cent of members turn out, people can push their own interests."

Lahtinen said: "Turnouts have been extremely disappointing. The problem is that most members join Nominet to get cheaper domain names and then forget about it. It think the whole model is at risk of breaking."

UK domain name forums are now alive with debate about the elections in a way not seen before. So, we should see if the problem for Nominet has been a simple one of low turnout, or perhaps deeper unrest, in a month. Some members expect government intervention if the board doesn't get its way. ®

Update

Jim Davies got in touch to say he has now answered the Nominet board's call for full disclosure. You can read his critical response here.

The other candidates opposed by the board have also answered the call. You can read their responses here.