I'm afraid this didn't work for me.  I installed network-manager
1.2.2-0ubuntu0.16.04.3 from xenial-proposed, ran 'systemctl restart
NetworkManager' as root and reconnected to the VPN and I see the same
behaviour (i.e. I get DNS resolution failure for non-VPN domains).  I
am on wifi only and both v4 and v6 are set to route all outbound
traffic.

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https://bugs.launchpad.net/bugs/1592721

Title:
  Don't write search domains to resolv.conf in the case of split DNS

Status in network-manager package in Ubuntu:
  Fix Released
Status in network-manager source package in Xenial:
  Fix Committed

Bug description:
  [Impact]
  All VPN users meaning to use split-tunnelling in a situation where leaking 
DNS data to the internet about what might be behind their VPN is undesirable.

  [Test case]
  1) connect to VPN
  2) Use dig to request a name that should be on the VPN
  3) Verify (kill -USR1 the dnsmasq binary from NM) that the request has only 
gone through the VPN nameservers (only its request number should have increased 
by one)
  4) Use dig to request a name off-VPN, such as google.com.
  5) Verify (kill -USR1 again) that the request has caused the non-VPN 
nameserver request number to increase, and that the VPN number has not 
increased.

  It is easier to verify this when there is as little traffic as
  possible on the system, to avoid spurious DNS requests which would
  make it harder to validate the counters.

  [Regression potential]
  This change modifies the way in which DNS nameservers and search domains are 
passed to dnsmasq, as such, if a VPN is configured in a non-standard way and 
intended to be used to resolve all network requests (which is typically not the 
case for split-tunnelling) or if the public network is intended to always 
resolve all requests while the VPN still provides search domains, one might 
observe incorrect behavior.

  Possible failure cases would include failure to resolve names
  correctly (resulting in NXDOMAIN or REFUSED from dnsmasq) or resolving
  to the incorrect values (if the wrong nameserver is used).

  ---

  Currently, NM will write all search domains to both any DNS-handling
  plugins running, and also to resolv.conf / resolvconf; in all cases.

  The issue is that doing so means that in the split-DNS case on VPNs,
  you might get a negative response from all nameservers, then a new
  request by glibc with the search tacked on, to nameservers again,
  which might cause DNS requests for "private" resources (say, on the
  VPN) to be sent to external, untrusted resolvers, or for DNS queries
  not meant for VPN nameservers to be sent through the VPN anyway.

  This is fixable in the case where we have a caching plugin running
  (such as dnsmasq). dnsmasq will already know about the search domains
  and use that to limit queries to the right nameservers when a VPN is
  running. Writing search domains to resolv.conf is unnecessary in this
  case.

  We should still write search domains if no caching gets done, as we
  then need to expect glibc to send requests as it otherwise would.

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