Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the implementation of the Internet Top Level Domain ".EU"

(presented by the Commission)

EXPLANATORY MEMORANDUM

1 Introduction

In February 2000, the Commission initiated a public consultation on creating the .EU Internet Top Level Domain (TLD). The Commission published its conclusions as to the results of that consultation in July 2000 [1] ("the July 2000 Communication"). In the light of the strongly positive response, the Commission has requested delegation of the .EU domain from the Internet Corporation for Assigned Names and Numbers (ICANN) by letter of 6 July 2000. ICANN replied on 10 August 2000 and discussions between ICANN and the Commission continue.

[1] COM(2000) 421, 5 July 2000.

On 25 September 2000, the ICANN Board adopted a Resolution according to which ISO two letter codes, such as EU, the use of which has been reserved for any application in relation with the code are delegable as ccTLDs (country code Top Level Domains), subject to achieving appropriate agreements between ICANN and the Registry . [2] This decision of principle is very welcome and permits the EU Institutions and the European private sector to proceed with the proposal, in the full expectation that the necessary technical and legal agreements will be put in place in a timely manner.

[2] See: http://www.icann.org/minutes/prelim-report-25sep00.htm.

Meanwhile, as announced in the July 2000 Communication, the Commission and the Internet community in Europe have moved forward with detailed technical and policy preparations. This has been done in the context of the existing European Community Panel of Participants (EC-POP) who have constituted an Interim Steering Group (ISG) that worked on this question during May-October 2000.A report on their work is available and has been published for comment . [3] Indeed, the Community has an interest in benefiting from the available expertise among those groups most actively participating in the development of the Internet in Europe. For that reason, particular attention has been paid to the work of the Interim Steering Group, including for example, its analysis of the eventual operational and technical characteristics of the Registry, contractual relationships between the Commission and the Registry and the options for the form that organisation could take. The ISG members recognise that their work in this area was of an advisory nature.

[3] The Dot EU Registry Proposal, Report of the Interim Steering Group (ISG) © ec-pop.org, September, 2000. < http://www.ec-pop.org/1009prop/index.htm >.

The July 2000 Communication stated that:

"the Commission will draw conclusions for the legal framework for the operation of the system, including the designation of the entity in charge of running the .EU registry and the guidelines for its registration policy, which will include measures to counter the speculative and abusive registration of names. These conclusions will form the subject of a further Communication."

Having assessed the issue, the Commission has concluded that a further communication is not necessary and considers that it is appropriate to propose directly the instrument to implement the .EU domain. The Commission now proposes that the Council and the European Parliament decide with the adoption of this Regulation to charge the Commission with the implementation of the .EU TLD as soon as possible. The proposed European Parliament and Council Regulation specifies therefore the rules and principles under which the Registry will operate and defines the public policy framework and the procedure to adopt decisions in relation to public policy matters. Other aspects of the Registry 's policies would be decided by the Registry itself after appropriate consultations with the Commission and other interested parties. The Commission will be assisted in its tasks by an Advisory Committee comprising representatives of the Member States.

2 The Registry organisation

The Registry is the entity that will be entrusted with the organisation, administration and management of the .EU TLD.

The Registry will ensure three essential functions:

(a) Being the legal entity responsible for the Registry

(b) Implementing public policy rules, policies and procedures relating to the .EU TLD included in the Regulation or adopted by the Commission according to the consultation procedure provided by the Regulation.

(c) Organising, administering and managing the .EU TLD including the operations of maintenance of databases, registration of domain names, running the name-servers and dissemination of TLD zone files

Consistent with the outcome of the public consultation, the Registry shall be a not-for-profit organisation, operated in the public interest. The latter is indeed a well established principle for ccTLD registries, as expressed in the relevant ICANN and IANA documents, notably RFC 1591. [4]

[4] Request for Comments (RFC) 1591 states inter alia that: "These designated authorities are trustees for the delegated domain, and have a duty to serve the community ... both the nation, in the case of a country code, and the global Internet community. Concerns about "rights" and "ownership" of domains are inappropriate. It is appropriate to be concerned about "responsibilities" and "service" to the community. The designated manager must be equitable to all groups in the domain that request domain names. This means that the same rules are applied to all requests, all requests must be processed in a non-discriminatory fashion, and academic and commercial (and other) users are treated on an equal basis. No bias shall be shown regarding requests that may come from customers of some other business related to the manager -- e.g., no preferential service for customers of a particular data network provider. There can be no requirement that a particular mail system (or other application), protocol, or product be used." IANA, March 1994.

The Commission will designate the Registry organisation. The report of the Interim Steering Group (ISG) describes the options for the structure and membership of the future Registry without making any final choices or decision. The report strongly recommends that the Registry should be an inclusive and representative organisation enjoying as broad a consensus of the interested parties as possible. The organisation of the Registry should facilitate consultation and participation of interested parties for a broad consensus of Internet operators and users throughout the Community.

The Regulation specifies the conditions according to which the Registry will organise, administer and manage the .EU TLD. Contractual arrangements between the Commission and the Registry shall ensure that the responsibilities of the Registry are carried out according to the Regulation and in particular that the conditions for the implementation of the .EU TLD are fulfilled in practice on a permanent basis. In this respect the Commission, acting on behalf of the Community will retain all rights to the .EU code, sufficient rights in all databases to be able to re-designate the registry should the need arise in the future, and other safeguards of a technical nature. The manner of delegating the operational functions of the registry to a registry organisation shall take full account of the character of the .EU domain name as a public resource, and that the policy of the not-for-profit entity will be effectively respected in its operation. The contract would exclude the European Community from legal or commercial liability arising from the organisation, administration and management of the Registry.

An agreement between ICANN/IANA and the Registry regarding the technical and organisational aspects of the implementation of the .EU TLD will be concluded with the prior consent of the Commission.

3 Policy Framework

Public policy rules concerning the implementation of the .EU TLD, not laid down in the Regulation, will be adopted by the Commission in accordance with the procedure referred to in Article 5, the Registry being consulted.

In order to prevent and resolve conflicts between domain names registration and intellectual property rights, the Commission shall, in accordance to the procedure laid down in the Regulation adopt a policy to prevent speculative and abusive registration of domain names and a policy for the extra-judicial settlement of conflicts which shall conform to best practices including the recommendations of the World Intellectual Property Organisation (WIPO).

The Commission will initiate a public consultation [5] on the basis of draft principles for the prevention of speculative and abusive registration of names, and shall propose a Code of Conduct on the basis of the results of the consultation. Meanwhile, the Commission shall continue to consult with WIPO and with ICANN/GAC [6] on this matter.

[5] [This public consultation has been published at: http://www.dot-eu-consult.eu.int - to be confirmed].

[6] ICANN Governmental Advisory Committee (ICANN-GAC).

Subject to certain safeguards the detailed registration policy will be determined by the Registry in consultation with the Commission and according to the contractual arrangements. Relevant safeguards would include for example the respect of the applicable Community and national laws, and of technical and operational "best practice" as determined from time to time by ICANN and IANA. The available options for the registry's registration policy are discussed in the ISG Report, including a discussion of the options for the creation of generic second level domains.

In relation to the registration policies to be adopted by the Registry, the Commission is currently examining the following questions:

*definition of the name-space reserved for the use of the EU Institutions and eventually the governments of the Member States

*definition of the name-space destined particularly for public-service, not for profit organisations, co-operative, cross-border projects and similar entities

*reservation of names associated with the European Union in all relevant languages.

The Council and the European Parliament, together with other EU organisations and entities, are invited to identify their requirements in this regard and communicate them to the "Comité Editorial Inter-Institutionnel Internet (CEiii)" [7].

[7] The CEiii is the Inter-institutional committee charged with the management of Europa and other aspects of the EU's presence on the world-wide-web, including the DNS.

Judicial remedies available to third parties include standard remedies such as annulment under Article 230 (ex 173) for Commission acts , European Court of Justice action in case of public policy acts of the Registry, subject to control by the Commission, and Court action in the Member State where the Registry is established for commercial and administrative acts of the Registry.

Conclusions:

The Council and the European Parliament are invited to adopt the attached Regulation and to charge the Commission to implement the .EU TLD, to designate a Registry and to develop the public policy rules in accordance with the procedure set by the Regulation.

Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on the implementation of the Internet Top Level Domain ".EU"

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 156 thereof,

Having regard to the proposal from the Commission [8],

[8] OJ C , , p. .

Having regard to the opinion of the Economic and Social Committee [9],

[9] OJ C , , p. .

Having regard to the opinion of the Committee of the Regions [10],

[10] OJ C , , p. .

Acting in accordance with the procedure laid down in Article 251 of the Treaty,

Whereas:

(1) The creation of the .EU Top Level Domain (TLD) is included as one of the targets to accelerate electronic commerce in the eEurope initiative as endorsed by the European Council at its meeting in Lisbon on 23 and 24 March 2000.

(2) The Communication from the Commission to the Council and the European Parliament on the Organisation and Management of the Internet [11] refers to the creation of the .EU TLD and the Council Resolution on the Communication [12] charges the Commission to encourage the co-ordination of policies in relation to the management of the Internet.

[11] COM(2000) 202.

[12] [.....]

(3) Internet TLDs are an integral part of the Internet infrastructure. They are an essential element of the global interoperability of the World Wide Web ("WWW" or "the Web") The connection and presence permitted by the allocation of domain names and the related addresses allow users to locate computers and Web-sites on the Web. TLDs are also an integral part of every Internet e-mail address.

(4) The .EU TLD will promote easier access to Internet networks and to the virtual marketplace based on the Internet, in accordance with Article 154(2) of the Treaty, by providing an additional and alternative registration domain to existing country code Top Level Domains (ccTLDs) or global registration in the generic Top Level Domains (gTLDs), and will in consequence increase choice and competition.

(5) The .EU TLD will improve the interoperability of trans-European networks, in accordance with Articles 154 and 155 of the Treaty, by ensuring the availability of .EU name servers in the Community. This will affect the topology and technical infrastructure of the Internet in Europe which will benefit from an additional set of name servers in the Community.

(6) Through the .EU TLD, the Internal Market will acquire higher visibility in the virtual marketplace based on the Internet. The .EU TLD will provide a clearly identified link with the European Community, the associated legal framework, and the European marketplace. It will enable undertakings, organisations and natural persons within the Community to register in a specific domain which will make this link obvious. As such the .EU TLD will not only be a key building block for electronic commerce in Europe but will also support the objectives of Article 14 of the Treaty.

(7) The .EU TLD should be implemented in accordance with the relevant principles adopted by the Governmental Advisory Committee (GAC) of the Internet Corporation for Assigned Names and Numbers (ICANN). These principles state, in particular, that the Internet naming and addressing system is a public resource that must be managed in the interests of the global Internet community, and that country code top level domains are operated in trust by Registries for the public interest, including the interest of the Internet community, on behalf of the relevant public authorities, including governments who ultimately have public policy authority over their ccTLDs, consistent with universal connectivity of the Internet

(8) The Commission, acting on behalf of the Community, has requested the delegation of the EU code for the purpose of creating an Internet TLD. On September 25, 2000 ICANN issued a resolution providing that "alpha-2 (...) codes are delegable as ccTLDs only in cases where the ISO 3166 Maintenance Agency, on its exceptional reservation list, has issued a reservation of the code that covers any application of ISO 3166-1 that needs a coded representation in the name of the country, territory or area involved". Such conditions are met by the EU code which is therefore "delegable" to the Community.

(9) The Community should establish the conditions of implementation of the .EU TLD to provide for the designation of a Registry and establish the public policy framework within which the Registry will function.

(10) In accordance with the principles of subsidiarity and proportionality as set out in Article 5 of the Treaty, the objectives of the proposed action, to implement the .EU TLD, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and effects of the action, be better achieved by the Community. This Regulation confines itself to the minimum required in order to achieve those objectives and does not go beyond what is necessary for that purpose.

(11) In accordance with Article 2 of Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission [13], measures for the implementation of this Regulation should be adopted by use of the advisory procedure provided for in Article 3 of that Decision.

[13] OJ L 184, 17.7.1999, p. 23.

HAVE ADOPTED THIS REGULATION:

Article 1

Subject matter

This Regulation charges the Commission with the implementation of the .EU Top Level Domain (TLD), sets out the conditions for such implementation, including the designation of a Registry, and establishes the public policy framework within which the Registry will function.

Article 2

Characteristics of the Registry

1. For the purposes of this Regulation, "Registry" means the entity entrusted with the organisation, administration and management of the .EU TLD including maintenance of the corresponding databases, registration of domain names, operation of the Registry TLD name-servers and dissemination of TLD zone files.

2. The Commission shall designate the Registry. The Commission and the Registry shall enter into a contract for a limited period of time, renewable. The contract shall specify the conditions according to which the Commission supervises the organisation, administration and management of the .EU TLD by the Registry.

3. The Registry shall be a not-for profit entity formed in accordance with the law of a Member State and having its registered office, central administration and principal place of business within the Community.

4. The Registry shall enter into a contract with the Internet Corporation for Assigned Names and Numbers (ICANN), having obtained the prior consent of the Commission. Such contract shall be consistent with the relevant principles recommended by the ICANN Governmental Advisory Committee (GAC).

Article 3

Obligations of the Registry

1. The Registry shall observe the rules, policies and procedures laid down in this Regulation and adopted by the Commission pursuant thereto.

2. The Registry shall :

a) organise, administer and manage the .EU TLD on the basis of principles of quality, efficiency, reliability and accessibility;

b) observe applicable public procurement rules and, in any event, observe transparent and non-discriminatory procedures;

c) register domain names in the .EU TLD requested by any:

(i) undertaking having its registered office, central administration or principal place of business within the Community, or

(ii) organisation established within the Community, or

(iii) natural person resident within the Community;

d) impose affordable annual fees directly related to costs incurred.

3. Any aspects of the registration policy for the implementation of the .EU TLD other than those referred to in Article 4(1) shall be determined by the Registry in consultation with the Commission and other interested parties and in accordance with the contract between the Commission and the Registry referred to in Article 2(2).

4. Any decision taken by the Registry shall be subject to the jurisdiction of the Member State of establishment of the Registry.

Article 4

Public policy framework

1. The Commission shall adopt public policy rules concerning the implementation of the .EU TLD in accordance with the procedure referred to in Article 5 (2), having consulted the Registry.

2. With a view to preventing and resolving conflicts between domain name registrations and intellectual property rights, and taking into account Community and national laws, the Commission, after consulting the Registry and in accordance with the procedure referred to in Article 5 (2), shall :

a) adopt a policy and procedure to prevent speculative and abusive registration of domain names, which shall conform to best practices, including the recommendations of the World Intellectual Property Organisation (WIPO);

b) adopt an extra-judicial settlement of conflicts policy and procedure to promptly resolve disputes between domain names and intellectual property rights, which shall conform to best practices, including the recommendations of the WIPO. This policy shall provide adequate procedural guaranties for the parties concerned and shall apply without prejudice to any court proceeding.

Article 5

Committee

1. The Commission shall be assisted by the committee established by [Draft] Directive XX/XX/EC on a common regulatory framework for electronic communications networks and services [14].

[14] Proposal for a Directive on a common regulatory framework for electronic communications networks and services - COM(2000) 393.

2. Where reference is made to this paragraph, the advisory procedure laid down in Article 3 of Decision 1999/468/EC shall apply, in compliance with Article 7 and Article 8 thereof.

Article 6

Reservation of rights

The Community shall retain all rights relating to the .EU TLD including, in particular, intellectual property rights and other rights to the Registry databases required to ensure the implementation of this Regulation and the right to re-designate the Registry.

Article 7

Entry into force

This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Communities.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels,

For the European Parliament, For the Council

The President The President

FINANCIAL STATEMENT

1. Title of Operation

Implementation (creation, operation and supervision) of the .eu Internet Top Level Domain

2. Budget Heading Involved

B5-302

3. Legal basis

Article 156 of the Treaty

4. Description of Operation

4.1 General Objective: To create a system and facilities for the registration of domain names for Internet identification and addresses under the'.eu' Top Level Domain.

The Commission proposes that the Council and the European Parliament should adopt a Regulation that would inter alia empower the Commission to designate an organisation that would perform the functions of a Registry of domain names under'.eu'.

The appropriations described in this financial statement are those required to enable the Commission to develop policy for and maintain control over the Registry, including the employment of experts for evaluation, advice to the Commission, audit and review.

The Registry will set up and operate all necessary technical and organisational systems and facilities. The Registry will accredit the Registrars, or commercial agents, that will perform the actual registration of domain names in the'.eu' domain on a commercial and competitive basis. Specific arrangements will be put in place for registrations related to public organisations and services, including the Institutions of the European Union. The Registry will charge the registrars a fixed fee for each registration to defray its costs and will operate on a sustainable cost-recovery, not-for-profit basis.

The investments and expenditure by the Registry are expected to be undertaken by the Registry against the expectation of revenue from registrations. The amount of a fee for a registration will be fixed in order to cover the expenditure of the Registry. It is not the intention to use the Registry to generate income. However, taking into account the difficulty of making reliable forecasts for the first year, if a surplus is recorded after the first year, that surplus will be transferred to the to the Community budget. While normally the funds would be considered as general receipts to the budget of the Community, as a precautionary measure, it may be useful to consider that they temporarily constitute a reserve available for intervention in the event of force majeure (in case of loss or by major problems with the Registry).

4.2 Period covered and arrangements for renewal

2001 - 2005, renewable on the basis of a report on achievements and an assessment of future requirements

5. Classification of expenditure or revenue

5.1 Non-compulsory expenditure

5.2 Differentiated appropriations

5.3 Type of revenue involved

Revenue will comprise registration fees received from registrars. Such income will be employed to defray investments and ongoing expenditure by the Registry in the performance of its contractual obligations.

6. Type of expenditure or revenue

Expenditure by the Commission relates to the following functions:

*Consultation of the private sector participants e.g. costs of experts and meetings

*Consultation of the Member States e.g. Advisory Committee and other meetings

*Publications in the context of this initiative.

7. Financial Impact

7.1. Method of calculating the total cost of operation (relation between individual and total costs)

The appropriations needed are those to enable the Commission to maintain policy control over the Registry.

7.2. Itemised breakdown of cost

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7.3. Operational expenditure for studies, experts etc. included in Part BA of the budget

Commitment appropriations EUR

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8. Fraud prevention measures

The contract for the operation of the Registry shall maintain a requirement for public-service rules for transparency in recruitment, expenditure and contracts. The accounts of the contracting organisation shall be open to scrutiny by the Commission and other competent institutions. The Commission will have a right of oversight over major items of expenditure.

Three years after beginning operations, independent experts will assess the impact of the action and make recommendations as to the appropriate conditions for the continuing operation of the Registry

9. Elements of cost-effectiveness analysis

In view of the requirement that the Commission itself would acquire and retain a permanent role of public policy oversight for the Registry and that this would include responsibility for public policy-related decisions regarding the Registry's operations, a small permanent staff and corresponding resources will be required. This requirement will be particularly onerous during the pre-startup period where substantial policy development will have to take place prior to the constitution and designation of the Registry itself. The requested staff and budgetary resources are the minimum required during the initial phase.

9.1 Specific and quantified objectives; target population

9.1.1 Regarding the Commission's role, an approximate scenario would involve, during the initial period:

*Member States Advisory Committee: quarterly, involving 20-25 people

*Advisory panel meetings: initially monthly, involving 15-20 people, including travel and per-diem.

*Private Sector consultation: once every three months, involving 100-150 people. (Travel and per-diem re-imbursed only in exceptional circumstances.)

*International relations: three or four meetings per year, involving long-distance travel.

Some of these costs should decline as soon as the basic policy decisions have been taken and the Registry and its relationships with the Commission have reached a steady state.

9.1.2 Regarding the Registry itself: it is not possible to make reliable forecasts because the overall market is growing extremely rapidly, and the number of registrations will depend crucially on the initial Registration Policy. For example, by comparison with the scale of existing medium-large sized Registries, one could envisage that there could be about one million registrations in the first year of operation and a further million in the following two years. On the assumption of an annual fee to the registry of EUR 40 per domain name, a total of EUR 40 million could be received in the first year. A lower initial registration fee is probably inadvisable, pending a solution to the problem of bulk registrations for speculative purposes, and related infringement of property and other rights. Equipment and connectivity costs may be directly related to the rate at which new registrations are accepted and processed, however, staff costs are much more closely related to the Registration Policy. The Registry's staff requirements will include technical and commercial operations, customer relations, procurement, legal services and management. The absolute numbers of initial staff required will, as noted above, depend on the details of the registration policy (e.g. multilingual registrations) and should in the first instance be based on an evaluation of the proposals received.

9.2. Grounds for the operation

Since the advent of Internet addressing, Top Level Domains based on letters, e.g. .int, .com, instead of the underlying numeric addresses, some 20 million addresses have been registered under the global domains,'.com','.net' and'.org'. Seven new domains have recently been announced and there is significant use of country code domains such as'.de' (3 million names) and'.uk' (over 2 million names). There has been a demand for a'.eu' domain to indicate European identity and legal base. It is deemed appropriate that the European Community retain ultimate authority for the domain, as is increasingly the case for national governments with respect to the country-code domains. Therefore the Commission will delegate day-to-day management to a contracted organisation on a cost recovery basis, but will retain public policy control.

9.3. Monitoring and evaluation of the operation

After three years, a report will be drawn up by independent evaluators evaluating the results achieved. The evaluation will assess the effectiveness of the action, the cost-effectiveness to the users, the degree of satisfaction by users and the appropriateness of the commercial partnership. Based on this report a proposal will be made to continue, discontinue or modify the operation.

10. Administrative expenditure

Requirements in terms of human resources will be covered from existing staff. Administrative resources will be covered in 2001 from the allocations requested in the context of the budgetary procedure for 2001, unless future resources can be obtained.

10.1 Effect on the number of posts

The operation requires 6 staff members (3 A, 1 B, 2C) to manage the operation, including maintaining appropriate presence in EU and international fora.

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10.2 Overall financial impact of human resources

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10.3 Increase in other administrative expenditure as a result of the operation

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