If you are setting up the Palo Alto Networks firewall to work with a peer that supports policy-based VPN, you must define Proxy IDs. Devices that support policy-based VPN use specific security rules/policies or access-lists (source addresses, destination addresses and ports) for permitting interesting traffic through an IPSec tunnel. These rules are referenced during quick mode/IKE phase 2 negotiation, and are exchanged as Proxy-IDs in the first or the second message of the process. So, if you are configuring the Palo Alto Networks firewall to work with a policy-based VPN peer, for a successful phase 2 negotiation you must define the Proxy-ID so that the setting on both peers is identical. If the Proxy-ID is not configured, because the Palo Alto Networks firewall supports route-based VPN, the default values used as Proxy-ID are source ip: 0.0.0.0/0, destination ip: 0.0.0.0/0 and application: any; and when these values are exchanged with the peer, it results in a failure to set up the VPN connection.
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