State of the Industry
On October 17, 2019 Canada celebrated the one year anniversary of the coming into force of the Cannabis Act and the legalization of cannabis for recreational purposes. The first year of legalization was met with boundless optimism, but was ultimately fraught with challenges ranging from nationwide supply shortages, corporate scandal, product recalls, to a sluggish roll-out of storefront retail in Ontario. Notwithstanding the ups and downs in year one of legalization, the Canadian cannabis industry continues to generate excitement, as new product categories and markets become available.
On the one year anniversary of legalization, amendments to the Cannabis Regulations made under the Cannabis Act came into force, legalizing the production and sale of cannabis edibles, extracts and topical products. In a recent report, Deloitte estimated that the Canadian market for alternative cannabis products, such as edibles, beverages and cannabis concentrate vaporizers, could be worth as much as $2.7 billion annually. Despite the implementation of these regulations in October, these products are not expected to be available to customers until late December 2019, at the earliest, resulting from Health Canada’s 60-day review period under the regulatory framework to evaluate new drug submissions.
Excitement also continues to build regarding liberalization of cannabis laws internationally, most notably by Canada’s closest neighbour, the United States. In January 2019, the United States passed legislation that legalized hemp-derived cannabidiol (CBD), essentially making it an ordinary agricultural commodity. Canada has taken a more restrictive approach to hemp-derived CBD, and legalization of such products by the United States has allowed Canadian cannabis companies to establish a foothold in the vast American market.
Although cannabis remains federally illegal in the United States, draft legislation that would effectively decriminalize the American cannabis industry is gaining traction. Canadian lawyers will continue to monitor legislative developments over the coming months that could potentially open the door for cross-border activity upon federal decriminalization in the United States.
Opportunities for Young Lawyers
Canada’s cannabis economy has been a significant driver of job creation over the past twelve months. Statistics Canada estimates that there are 9,200 people currently employed in the Canadian cannabis industry, a near 250% increase from an estimated 2,630 people in 2018. A truly remarkable aspect of the cannabis industry is the extent to which it intersects with multiple areas of law. As a result, there are significant opportunities for lawyers who work, or advise participants, in the cannabis sector.
For young lawyers beginning their career, it may be worthwhile to consider the diverse array of legal work that is currently, or expected to be, in demand in the cannabis sector.
Most directly, cannabis companies are developing robust in-house legal teams to address the myriad legal issues that face their business. Similarly, law firms of all sizes are building dedicated cannabis practice groups to assist licensed producers, retailers and other parties providing ancillary services to or investing in the cannabis industry. The types of matters these lawyers advise on range from commercial agreements, such as supply agreements, to joint ventures and license agreements, to more complex corporate/commercial matters, such as debt or equity financings, strategic investments and purchase and sale transactions.
Operating in a highly regulated environment, in-house counsel to cannabis companies are also responsible for ensuring the operations of the business and its corporate development activities are conducted in compliance with applicable legislation. These lawyers may liaise directly with Health Canada and securities regulators regarding regulatory issues.
Cannabis-related expertise is also in demand for both internal and external advisors to those providing ancillary services to the cannabis industry and to “cannabis-adjacent” industries, such as alcohol, tobacco, pharmaceuticals and consumer-packaged goods, where companies may be looking at complementary or defensive opportunities in the cannabis industry.
One area of law that is of increasing importance to cannabis companies is intellectual property law. The Cannabis Act imposes very strict restrictions on the ability of cannabis companies to brand their products. As a result, cannabis companies are building a portfolio of intellectual property in an attempt to protect the differentiating features of their product offerings. Internal and external counsel with intellectual property expertise will continue to be in high demand in this regard.
Whether working in-house at a company or in private practice in the labour and employment sector, development of human resource policies related to cannabis use (both medical and recreational) will be an area in which lawyers will be expected to provide guidance.
In addition to in-house and private practice opportunities, there are numerous cannabis-related legal roles in the public sphere as well. As previously noted, the cannabis industry is highly regulated and there are opportunities for lawyers federally at Health Canada, as well as provincial regulators. Additionally, securities regulatory authorities, such as the Ontario Securities Commission or Toronto Stock Exchange, need their internal counsel to have cannabis expertise in order to effectively regulate publicly-traded cannabis companies.
Cannabis laws are still developing at both the federal and provincial levels. The Cannabis Act is subject to review after three years and the federal government recently solicited consultation regarding the development of regulations governing cannabis health products. There will continue to be roles for legal policy-makers domestically, as regulation of this nascent industry develops. Similar opportunities may also exist internationally. Many international jurisdictions are looking to Canada as an example as they consider their own cannabis legalization initiatives. For example, Luxembourg and New Zealand are currently developing legislation governing the production and sale of cannabis for recreational purposes and have consulted with Canadian industry participants regarding Canada’s legislative framework for cannabis.
Finally, opportunities for advocacy continue to develop. The history of cannabis legislation in Canada has been shaped by constitutional challenges and there has already been a successful challenge in the Québec Superior Court regarding the restrictions on home-growing of cannabis plants under the Cannabis Regulation Act (Québec). There may continue to be challenges to legislation enacted at the federal and provincial levels governing the Canadian cannabis industry. Furthermore, there have already been product recalls in respect of mouldy cannabis products and some scientists posit that insufficient research has been conducted regarding the potential negative health effects of cannabis. These facts suggest the industry could be primed for product liability class action lawsuits at some point in the future.
Conclusion
The Canadian cannabis industry continues to develop at a rapid pace, which presents considerable challenges and opportunities for industry participants. With an evolving regulatory landscape and emerging market opportunities, lawyers will continue to be in high demand in all facets of the industry. The regulations governing the cannabis industry are new for all legal professionals; young lawyers have the opportunity to develop expertise that puts them on a similar playing field as more experienced practitioners. As illustrated above, the cannabis industry cuts across a wide variety of practice areas, and no matter where a young lawyer finds him or herself following law school, familiarity with cannabis laws should prove to be an asset.