The policy intersection algorithm results in policy assertions with nesting to be verbosely expressed with all of the possible nested assertions marked as optional="true".  One example of this is SecurityPolicy with X509, detailed in http://lists.w3.org/Archives/Public/public-ws-policy/2007May/0160.html.  

The scalability problem is that it may be difficult to list and exchange all the possible nested assertions.  The performance problem is that such a scale may result in slow policy processers performing intersection.

One counter-arguments are that the number of nested assertions is not large enough to warrant this optimization, and that the optimization of adding optional="true" is sufficient.  The general argument of premature optimization applies.  This would be a close with no action or defer to v.Next.

Proposal 1:
Update the policy intersection algorithm so that an empty policy assertion matches a policy assertion with a nested assertion resulting an the same policy assertion with a nested assertion.  

Proposal 2:
Provide an explicit wildcard to match any nested assertions.