Developments in the Cannabis Regulatory Field
A Shifting Landscape
The cultural and legal landscape for cannabis has shifted significantly in recent years. Many changes have been highly visible, such as the proliferation of cannabidiol (CBD) products on the high street and the legal change that allowed medicinal cannabis to be prescribed for the first time in the UK from 1 November 2018[1]. In November 2020 the Court of Justice of the EU ruled that CBD is “not a narcotic” in a much anticipated ruling in the case of Kanavape[2], a stance that had already been taken in the UK[3] and one which was adopted soon after by the UN[4].
Inevitably, the process has been a piece-by-piece transition, rather than a neatly packaged suite of legal changes. Those involved in this industry, whether it be through medical prescription and research, production of CBD products or financial investment in legal cannabis ventures face an uncertain legal landscape.
The Role for Regulation
Effective regulation in the industry has an important role to play. Far from being rejected as red tape liable to stifle growth, a clear and effective regulatory framework is seen by many as vital to its growth and development.
Firstly, it has the potential to provide much needed certainty in a legally unclear area. Although in 2018 a medical exception was carved out of the legal prohibition on cannabis, it is still an uphill battle for patients to gain access and very few NHS prescriptions have been written to date[5]. Proper regulatory tramlines could help bring clarity and security to doctors making prescription decisions and, in turn, could be lifechanging for patients seeking treatment for conditions such as epilepsy.
Secondly, regulation may play a critical role in addressing the stigma attached to cannabis. Cannabis has been unambiguously illegal in the UK for almost a century. Possession with intent to supply can attract a sentence of up to 14 years. However, in recent years it has become clear that that stigma need not necessarily attach to the whole cannabis plant in such black and white terms[6]. Inevitably, the path for cannabis from a blanket classification as an illegal narcotic to a more nuanced position will not be easy. A robust and comprehensive regulatory framework has an important role to play in guiding public perception and ensuring that stigma attaches in the right places without stifling development in others.
Thirdly, clear regulation will have financial benefits for many stakeholders in the industry. A legal marketplace presents significant commercial opportunities and those who achieve regulatory approval will surely benefit from reduced litigation risk.
New FCA Categorisation of Cannabis for Listings
Regulatory change is underway. In September 2020 the Financial Conduct Authority released long awaited guidance for cannabis companies interested in listing on a regulated UK stock market[7]. The guidance outlined the position in broad terms in respect of three categories: recreational cannabis companies, UK-based medicinal companies and overseas licensed medicinal companies.
Unsurprisingly recreational cannabis companies cannot be admitted to the Official List.
In respect of UK-based medicinal companies, the position is clear: if they have a Home Office licence they can be admitted to the list.
The position in respect of overseas licensed medicinal companies is less definitive. Previously, an investment in such a company could be a criminal offence under the Proceeds of Crime Act 2002. As the guidance makes clear, the FCA “[couldn’t] assume a person who has been licensed in an overseas country would receive a licence here in the UK as licensing regimes differ globally”. The new guidance improves the position by allowing overseas medicinal cannabis companies to be listed on regulated UK stock markets if they satisfy the FCA that, firstly, their activities would be legal if carried out in the UK and, secondly, that their legal status in their home country also checks out.
Whilst this a step towards greater certainty, the situation for overseas companies remains far from clear. What would the position be, for example, in respect of a company based in America that is involved, legally on its own turf, in both medical and recreational cannabis? The legal fate of a listing or investment in such a company in the UK is unclear. One might predict that if the proceeds from the medical and the recreational arms of the company were kept wholly separate an investment would fall on the right side of the law, but the waters remain murky.
CBD as a “Novel Food”
A further recent regulatory development arrived in January 2019, with the classification of CBD extracts, derived from cannabis and hemp, as a “novel food”[8]. Novel foods cannot be marketed in the UK without authorisation by the Food Standards Agency. There is no exception or special arrangement for a specific business or industry sector[9].
Companies must make individual applications to the FDA for validation of each of their products. The 31 March 2021 application deadline is approaching. The process can be costly and may demand evidence of extensive research into the health implications of each product. The wait for authorisation can be long and there can be little doubt that the number of CBD products on the UK high street will shrink as a result.
On the other hand, for those that are able to gain authorisation the shift may be a welcome development, providing legal certainty and a greater sense of security.
The Untold Implications of Brexit
Brexit has the potential to bring more chaos to an already uncertain field. The full regulatory ramifications of this are as yet untold but there have been early signs that it may bring turmoil to this field.
Despite the legal change in 2018, it is estimated that around 40 children with severe epilepsy in receipt of UK prescriptions for cannabis oil rely on the Netherlands to fulfil them[10]. With Brexit, this arrangement was thrown into disarray. As of 1 January 2021, prescriptions issued in the UK cannot be dispensed by an EU member state. However, after a high profile campaign by the parents of children with severe epilepsy, the Department of Health confirmed that the government in the Netherlands would allow the continued supply of Bedrocan oil against UK prescriptions until 1 July 2021[11].
It is unclear quite what will happen after this six month reprieve. The Department of Health has stated that it is “exploring more permanent solutions”[12]. In the wake of Brexit, the UK must carve out its own regulatory framework in this area, a process that presents both stark risks and significant opportunities. It will be important to keep a close eye on how this area develops in the coming months.
Navigating a Complex Area
As a society, our understanding of and attitudes towards the nuance of cannabis are in a period of significant development. Regulatory change to match that is underway but it remains a work in progress. Proper legal guidance and assistance will undoubtedly be essential for those seeking to navigate this hugely important but complex and high-risk field.
[1] https://www.gov.uk/government/news/government-announces-that-medicinal-cannabis-is-legal
[2] ECLI:EU:C:2020:938 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62018CJ0663
[3] The FCA classifies CBD as a “novel food” – https://www.food.gov.uk/business-guidance/cannabidiol-cbd
[4] https://news.un.org/en/story/2020/12/1079132
[5]British Medical Journal, 21 September 2020, “So near yet so far: why won’t the UK
prescribe medical cannabis?”, Nutt, Bazire, Phillips and Schlag: https://bmjopen.bmj.com/content/10/9/e038687
[6] For example, the role of cannabis in certain medical conditions is now widely recognised (see https://bmjopen.bmj.com/content/10/9/e038687) and CBD is no longer classed as a narcotic by the UK, EU or UN
[7] https://www.fca.org.uk/news/statements/listings-cannabis-related-businesses
[8] https://www.food.gov.uk/business-guidance/cannabidiol-cbd
[9] Ibid
[10] https://www.epilepsy.org.uk/news/news/netherlands-government-honour-uk-cannabis-oil-prescriptions-75080
[11] https://www.bbc.co.uk/news/uk-england-coventry-warwickshire-55814012
[12] https://www.theguardian.com/politics/2021/jan/22/netherlands-to-supply-medical-cannabis-until-july-despite-brexit-ban
Categories: Newsletters
