Africa’s Internet registry placed under receivership

The African Network Information Centre (Afrinic) has been placed under receivership after being effectively paralysed by an injunction that a South African company obtained in the Supreme Court of Mauritius.

Afrinic is a Regional Internet Registry (RIR) — the entity responsible for the raw Internet resources, like Internet Protocol addresses, for the entire African continent and Indian Ocean region.

Industry players on both sides of a conflict involving the registry have welcomed the Mauritian Supreme Court’s latest ruling, as it potentially creates a path to reconstitute the ailing entity’s board and appoint a CEO.

Headquartered in Mauritius, Afrinic found itself on the wrong side of the country’s corporate governance laws after repeatedly ignoring warnings from its members and community about the danger.

It also disregarded judgments on some occasions, with the courts warning Afrinic that it was in danger of being held in contempt.

The blow that finally left Afrinic without a quorate board and ultimately without a CEO was struck by Crystal Web, a defunct Internet Service Provider that used to offer consumer DSL and fibre broadband in South Africa.

Although Crystal Web landed the paralysing hit, it was hardly the primary litigant in the over 55 court cases brought against Afrinic since June 2020.

The central figure in this battle is a company called Cloud Innovation and its founder, Lu Heng.

Lu also founded an IP brokerage called Larus Limited, which features throughout the saga.

Afrinic issued nearly 6.3 million IP version 4 (IPv4) addresses to Cloud Innovation between 2013 and 2016.

Think of a block of IP addresses as raw, undeveloped Internet land. Cloud Innovation was handed four relatively sizeable blocks over four years.

For anyone to connect to the Internet, or for any server to host content online, they need an IP address.

Thanks to the global depletion of IPv4 addresses, Cloud Innovation’s allocations have become increasingly valuable.

Industry insiders say an IP address can be bought for around $50 on the open market. At an exchange rate of R19 per dollar, Cloud Innovation’s IP addresses are worth close to R6 billion.

It is disputed whether Afrinic’s allocation of these IP address blocks aligned with its policies.

However, some knowledgeable industry insiders who spoke to MyBroadband on condition of anonymity say Cloud Innovation’s application was above board.

Others say that although there might not have been anything procedurally wrong about the allocation, there are concerns that Cloud Innovation applied for the blocks under false pretences.

Lu Heng, founder of Cloud Innovation and Larus Limited

In June 2020, a new Afrinic administration tried to take back Cloud Innovation’s IP address allocations, causing an immediate legal backlash from the company.

Based on documents Cloud Innovation released, Afrinic contended the company was in breach of its Registration Service Agreement for the following reasons:

  1. The records Cloud Innovation provided for its IP address blocks in the Afrinic Whois database are inconsistent with its use, based on data from the global Internet routing system. (If IP addresses are Internet real estate, then Afrinic’s Whois database is like the deeds office for all of Africa and the Indian Ocean region.)
  2. Cloud Innovation no longer uses its IP address blocks for the purposes it stipulated when it applied for them.
  3. Most of Cloud Innovation’s IP address space was used outside the Afrinic service region.

Lu Heng and several other Afrinic members baulked at this reasoning.

Lu said nothing in Afrinic’s policies restricted where and how they were allowed to use their IP addresses.

In response to Afrinic’s demands, Cloud Innovation said it takes great pains to ensure the registration information in the Whois database is accurate.

It disputed that it was using its IP addresses for a different purpose than it applied for, and pointed out that there was no formal mechanism to provide Afrinic with updates in this respect.

In addition to responding to Afrinic, Cloud Innovation applied for an injunction in the Mauritian Supreme Court.

Its application was set aside almost a year later, on 7 July 2021, and Afrinic moved immediately to terminate Cloud Innovation’s membership and seize its IP resources.

In a note to the Afrinic community mailing list, then-CEO Eddy Kayihura said the board found that Cloud Innovation failed to honour its obligations under its Registration Service Agreement.

Cloud Innovation applied for an urgent injunction against Afrinic to block the Internet registry from confiscating its IP addresses, which was granted on 13 July 2021.

Based on documents provided by Cloud Innovation, Afrinic failed to comply with the injunction until a judge warned the registry’s legal team that the court would hold it in contempt.

Afrinic reinstated Cloud Innovation’s membership and restored its IP address blocks on 15 July.

“This is where we take a left turn”

John Curran, CEO of the American Registry for Internet Numbers (ARIN), Afrinic’s North American counterpart, said in a talk last year that there was nothing untoward about the conflict up to this point in the story.

Curran said there was no reason to be concerned about a resource member like Cloud Innovation taking Afrinic to court to enforce their agreement.

“If you think your rights are being stomped on, you should be able to go to a court and have them enforced. Otherwise, what’s the point of an agreement if you can’t enforce it?”

However, the dispute took what Curran describes as a “left turn” when Cloud Innovation effectively froze Afrinic’s bank account.

Cloud Innovation filed a damages claim, then applied for a garnishee order that allowed it to attach up to $50 million (R740 million at the time) from Afrinic’s bank accounts.

Since Afrinic didn’t have the equivalent of $50 million in its accounts, its whole account was effectively frozen.

It should be noted that this order was granted without the court ruling on any of the merits of the claim or garnishee application — “at own risk and perils”, it’s called.

This phrase means the court granted the order based on the information provided, and if Cloud Innovation enforces the order, it does so at its own risk. It is unclear what Cloud Innovation’s legal liability is in Mauritius, should Afrinic opt to counter-sue in future.

“The moment you freeze the bank accounts of an RIR… [it] may not be paying for fairly essential services that are involved in keeping one-fifth of the RIR system running. That’s an issue — and somewhat unexpected,” Curran said.

Curran explained that when Cloud Innovation enforced the garnishee order on Afrinic, it galvanised all the RIRs to get involved.

“This was no longer just an Afrinic matter. This was a question of whether or not the Internet number registry system was still going to be running,” he said.

Following a flurry of activity, legal and otherwise, the court order was modified, and the freezing order was ultimately removed after being in effect for 2.5 months.

Eddy Kayihura, former Afrinic CEO

Election mess

Another legal skirmish broke out as Afrinic prepared to hold elections for seats on its board of directors that were about to become vacant.

As a membership-based organisation, Afrinic’s directors are appointed through nominations, followed by elections at a designated general meeting.

In essence, Cloud Innovation alleged that the Afrinic leadership was illegitimately blocking certain candidates from contesting the election.

Coincidentally, the candidates being blocked were ones with apparent ties to Cloud Innovation.

There was also a dispute over Afrinic extending the terms of some of its board members, with Cloud Innovation and others arguing the term extensions were against the organisation’s bylaws.

At the same time, allegations emerged that Cloud Innovation, through various affiliates, was attempting to buy votes.

When MyBroadband asked about this, Lu Heng emphatically denied any vote-buying.

He said the allegation doesn’t make sense since buying enough votes to affect the outcome would be prohibitively expensive.

Election fraud allegations and counter-allegations notwithstanding, in the end, Afrinic was slapped with another injunction — this time blocking it from holding the elections.

The final paralysing blow was struck by Crystal Web when it received an injunction against Afrinic confirming it does not have a properly constituted board.

Former Afrinic CEO Eddy Kayihura then approached the court to appoint a temporary board from a list of candidates provided by the African Telecommunications Union.

However, this motion was also opposed, with detractors arguing that it was just another attempt by a group with vested interests and a particular agenda to retain control of Afrinic.

As the board members’ terms expired, the organisation was left with insufficient directors to reach a quorum during meetings.

When Kayihura’s term as CEO expired, his contract was not renewed.

This left Afrinic headless and rudderless, with no way of electing new board members or appointing a CEO.

Paul Hjul, Crystal Web cofounder

“[We were] dragged into litigation with Afrinic due to the fact that efforts to get a properly operating [Annual General Members Meeting] (AGMM) resulted in it being very clear that the company had a target on its back,” Crystal Web cofounder Paul Hjul told MyBroadband.

Hjul describes Crystal Web as an “almost-successful startup Internet service provider and telecoms company in South Africa,” which now holds IP addresses and intellectual property.

Hjul readily confirmed that Crystal Web leased out its IP address space through Larus.

It was this relationship that got them in Afrinic’s crosshairs, he said.

“It had been more than gently suggested that when the board (improperly constituted as it was) had succeeded in stealing from Cloud Innovation, [its] sights would be turned on Crystal Web,” stated Hjul.

“Following the disastrous AGMM at which the board and management of Afrinic knew exactly what they were putting into play, it became inevitable that the courts would have to restrain the wanton misconduct of Afrinic.”

Hjul said that following their interdict, they also sought the appointment of directors by the court with the limited powers of convening a meeting of resource members.

“Afrinic’s management has, for no rational reason or consideration for the best interests of the organisation, opposed and frustrated the latter action,” said Hjul.

“Rather than enabling a general meeting of the resource members, several fatally flawed and badly conceived applications [were] brought trying to appoint directors without recourse to the members or members interests.”

Receivership

Afrinic was served with papers on 15 March 2023 to place the organisation under receivership.

Following hearings on 6, 11, and 12 September 2023, the court ruled in favour of Cloud Innovation.

Afrinic’s legal representative was ejected from the proceedings, with the court relying on Crystal Web’s earlier injunction to rule that the legal representative had not been properly appointed.

The hearing proceeded without Afrinic’s attorneys present, and the judge made the following ruling:

  • Afrinic is restrained from relocating or subjecting itself to a takeover, merger, restructuring, or management control.
  • The receiver’s role is to maintain the status quo of Afrinic’s assets and preserve the value of the business.
  • The receiver is tasked with overseeing the election per Afrinic’s constitution, facilitating the formation of a proper board, and appointing a Chief Executive Officer.
  • The receiver must hold elections within six months from 12 September 2023. In case of delays, the receiver can seek an extension through legal channels.

Hjul said Crystal Web welcomed the ruling.

“[We] look forward to a time when Afrinic operates in accordance with the law and its resource members interests and wishes.”

Cloud Innovation also welcomed it, calling it a “landmark judgment” by the Supreme Court of Mauritius.

“The judgment makes clear that the action sought by Cloud Innovation was ‘fully justified, reasonable and fair’ and our focus now must be on supporting the staff and members of Afrinic and delivering the court-ordered elections so that Afrinic can look to the future with confidence focused on its core services as Africa’s Internet registry,” Lu Heng said in a statement.

MyBroadband also spoke to industry insiders with knowledge of the case, who spoke on condition of anonymity because they aren’t authorised to talk to the media on the matter.

To clarify their position, one insider explained that they disagree with Cloud Innovation and believe its allocations should be investigated, but they also don’t think Afrinic was well-run.

These insiders also believed the judgment could be a positive development by opening a path to reconstituting Afrinic’s board legally.

Neither Afrinic nor the Official Receiver, Vasoodayven Virasami, responded to requests for comment.


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Africa’s Internet registry placed under receivership