The European Commission has welcomed moves in the U.S. to free ICANN, the internet domain name manager, from its historic ties to the U.S.

The U.S. Commerce Department will retain its oversight of ICANN, the Internet Corporation for Assigned Names and Numbers, for three more years under a new agreement that took effect at the beginning of this month.

The new agreement grants ICANN more freedom from U.S. government involvement, but stops short of full privatisation, which many in the Internet industry want.

European Commission spokesman Martin Selmayr said the Commerce Department had given "clear indications that this three year agreement between ICANN and the U.S. government would be the last."

"This is good news. Last year there were doubts about whether the U.S. would privatise ICANN," Selmayr said.

The new agreement, which runs until 2009, is subject to a review in 18 months. If in the review the Commerce Department concludes that ICANN is stable, transparent and accountable enough, it could decide to grant the non-profit organisation full autonomy immediately, the Commerce Department said in a statement Friday.

In addition to promising full autonomy, the U.S. government has shaped the new three-year agreement to help pave the way towards independence. From now on ICANN will determine how it works and what it works on, ICANN said.

It will no longer have to submit half-yearly progress reports to the Commerce Department. Instead it will publish an annual progress report on the internet for everyone to see.

Many observers argue that U.S. government involvement in ICANN is slowing the international development of the internet down and should pull out without delay. Others warn that ICANN isn't ready to fend for itself.

They believe the organisation hasn't yet proven that it can handle the entire task of domain name management alone, and if the government withdraws now this could compromise security and stability of the internet.