By Nader Hasan & Daniel Weiss, both associates at Norton Rose Fulbright’s Toronto office. With support from Vanessa Grant, partner.
The regulatory regime governing cannabis for recreational purposes in Canada is now a year old, but it is still in a state of constant evolution, especially with edibles and other related products which become legal earlier this month.
Since the legislation hasn’t been in effect for very long, there is still considerable uncertainty in how the legislation will be interpreted and how it will change over time. This makes it an interesting time to be a lawyer.
The challenge now is to give clients a degree of certainty as they set up their businesses in what is still a (relatively) uncertain market. As the industry and law evolve, so will the degree of certainty we can give our clients as to what is acceptable and what isn’t.
Here are a few of the more interesting challenges we’ve seen so far.
Challenge #1: Branding
We are all used to and expect branding. Simply take a look at the apple with a bite taken out of it. Cannabis companies also understand the value of a brand. They want to know whether the graphics, videos or other types of content they’ve created can go into their advertising, or where they are even allowed to display their promotional content.
If you’ve been in a cannabis retail store, you’ll notice, however, almost no branding on cannabis products. In fact, most of the packaging is covered with warnings and other information unrelated to the brand. As you might expect, cannabis companies are subject to strict rules around advertising, promotion and branding.
However, those rules aren’t as clear as one might expect. For example, the Cannabis Act (SC 2018, c 16) prohibits promotion that associates a cannabis brand with a “way of life”. The wording is rather vague, and figuring out where to draw the line is a case-by-case exercise.
Challenge #2: The Canadian Federation
Now is the time to dust off your notes and pay attention to the federal-provincial division of powers in constitutional law. Not only do cannabis companies have to comply with the federal Cannabis Act, they also have to comply with the separate regulatory regimes of thirteen different provinces and territories, each of which has its own rules for cannabis retailers.
In most provinces, cannabis producers are required to sell their product to provincial agencies, which then distribute it to retail outlets. In Saskatchewan, however, cannabis producers can develop sales relationships directly with retail stores. The Globe and Mail recently reported that Ontario might amend its legislation to adopt a similar model.
The varying regulations are not the only issue: the regimes themselves may have unclear terms. Some cannabis producers wanted to invest in Ontario retail stores, but were unsure how to do so given the restrictions on ownership imposed on them. As a result, some companies signed licensing or joint venture agreements which seem to be an effective, on-side solution.
Challenge #3: Blurred lines between CBD and THC
You could write a term paper on the legal status of CBD (cannabidiol) in other jurisdictions and Canada’s obligations under United Nations drug control conventions.
In Canada, CBD is regulated in the same manner as THC (tetrahydrocannabinol) under current legislation. Consequently, CBD (and products containing CBD) can only be sold by provincially-licensed cannabis retailers or federally-licensed sellers of cannabis for medical purposes, even though the medical risk profile of CBD (and the fact that it’s non-intoxicating) is very different from THC.
And now regulations may be changing again… Stay tuned!