[arin-ppml] Draft Proposal ARIN 2015-2 (Modify 8.4 (Inter-RIR Transfers to Specified Recipients))

[Christian Tacit]

I am writing on behalf of the ARIN AC to seek additional input from the community regarding the merits of an amendment being considered to Draft Policy ARIN-2015-2 to address concerns that the proposal as originally drafted provides significant opportunities for circumvention of the anti-flip provisions of Section 8.4.

We have addressed the concern by proposing to introduce a requirement that there must be some form of affiliate relationship between the source and recipient entity that will make it reasonably likely that eliminating the 12 month anti-flip period in that situation will meet the needs of multi-region network operators without encouraging abuse. In order to determine the nature of the affiliation that might be sufficient, we turned to the Virginia Stock Corporation Act and used the affiliation principles set out therein based on control, except that we are proposing to increase the beneficial ownership portion of the test from "10% or more" to "more than 50%" relative to the statute for greater certainty. If this approach is used, the text of the fourth bullet under "Conditions on source of the transfer" in section 8.4 would be changed to read:


  *   Source entities within the ARIN region must not have received a transfer, allocation, or assignment of IPv4 number resources from ARIN for the 12 months prior to the approval of a transfer request, unless the source entities directly, or indirectly through one or more intermediaries, control, are controlled by, or are under common control with the recipient entities outside the ARIN region. This restriction does not include M&A transfers.
A new section 2.17 would also be added that reads as follows to define "control":

The term "control" means the possession, directly or indirectly, through the ownership of voting securities, by contract, arrangement, understanding, relationship or otherwise, of the power to direct or cause the direction of the management and policies of a person. The beneficial ownership of more than 50 percent of a corporation's voting shares shall be deemed to constitute control.

It is, of course, recognized that once numbering resources move to another region, ARIN polices cannot apply to the resources. However, it is important to note that circumvention of section 8.4 is already possible by using a two-step process (a section 8.2 transfer followed by a section 8.4 transfer). Accordingly, it appears that this modified proposal would not really increase abuse, but it would eliminate unnecessary cost and expense in legitimizing a practice that is valid for multi-regional network operators. Similarly, foreign entities are unlikely to go to the bother of acquiring North American corporations for the sole purpose of transferring numbering resources in a manner that contravenes the anti-flip provisions. In the end, an important question to answer is do we want to focus policy on facilitating legitimate transactions and making it more difficult (but not impossible) for abuses to occur, or stopping abuses at the expense of impeding legitimate transactions given that abuses can occur in other ways in any case.

We would be interested in community feedback prior to making the proposed change formally.

Thank you.

Chris Tacit
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