CANADIAN CANNABIS LEGALIZATION – PROHIBITION 2.0

BY ROBERT W.E. LAURIE

IN THE PREVIOUS instalment of “North of the 49th Parallel” entitled: “Tales From The Growside: A Canadian Cannabis Black Market Street Price Historical Primer,” we considered an account of black market cannabis prices in Canada. The

conclusion reached was that the risk and incentive to produce illegal weed remains, but the return on investment for black market growers in today’s market is nothing like it was in the late 1990’s.

In this edition of “North of the 49th Parallel,” I will present for American readers a basic overview of the current legal status of medical and pending recreational cannabis in Canada, and highlight some themes, tensions and contradictions underlying Canadian legalization strategies. In particular, I will set out the situation in Canada regarding the current legal status of cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR) and examine the Licensed Producer (LP) monopoly. The political players driving the promise of cannabis legalization in Canada will also be considered.

LEGAL STATUS OF CANNABIS IN CANADA

Legal cannabis in Canada is currently moderated under the Access to Cannabis for Medical Purposes Regulations (ACMPR). There are three avenues under the ACMPR by which one can legally obtain cannabis in Canada. They include grow it yourself, designate someone to grow it for you, and/or purchase it via mail order from a federally Licenced Producer (LP).

Following the doctor visit (and issuance of the recommendation) the patient will then need to complete a Health Canada ACMPR application form providing details regarding the applicant, the production location and whether the patient or someone else will be conducting the intended growing activity which is based on “plant count.” Details of all ACMPR forms can be found at:

https://www.canada.ca/content/dam/hc-sc/documents/ services/registration-form-formulaire-inscription-eng.pdf

A medical patient under the ACMPR can also designate someone else to grow their medical cannabis for them if they are unable to grow their own. The designated grower will need to pass a background check to screen for drug offence convictions in the last ten (10) years and is limited to growing for no more than two (2) people, including themselves.

Turning to plant count or the amount one can legally grow under an ACMPR license is determined by the daily amount of cannabis a patient is “recommended” (not prescribed) by their doctor in grams. If the production is indoor, the daily gram amount is multiplied by five (5) (i.e. 5.0 plants per gram). With respect to outdoor production, plant count is determined by multiplying the daily the dosage in grams by two (2) (i.e. 2.0 plants per gram). How Health Canada arrived at these plant count multipliers has never been adequately explained and is a ripe topic for analysis in a future installment of “North of the 49th Parallel” in Grow Magazine. Stay tuned.

A basic example illustrating a plant count calculation should make these concepts clearer.

Let’s say Justin attends his doctor who provides him with a medical recommendation that states he is allowed to access 12.0 grams of cannabis per day (regardless of form). If Justin intends to grow his cannabis inside (whether by himself or utilizing a designated grower, he will be allowed to grow a total of 60.0 plants (i.e. 12g x 5.0 plants) indoors. With respect to growing cannabis outdoors on an approved property, Justin would be permitted to grow a total of 24 plants (i.e. 12.0g x 2.0 plants) outdoors.

In the event that growing your own cannabis or utilizing a designated grower is not an option, the third avenue to acquire legal cannabis in Canada is to acquire it from one of the Health Canada-approved Licensed Producers (LPs).

LICENSED PRODUCERS – COMMERCIAL CANNABIS

Under the ACMPR, Licensed Producers (LPs) are the only legal businesses able to sell cannabis. Health Canada has only 38 authorized LPs listed on their website as of February 15, 2017.

(Despite the processing of 38 successful LP licenses, there are hundreds applications waiting for federal government licensing approval).

The process by which an LP license is granted is best described as long, exorbitant and expensive. One of the most expensive components of a LP application under the ACMPR involves securing property (indoor and outdoor). Many LP applicants have “died on the vine” paying lease rates on warehouse space while awaiting a license from Health Canada. For example, to grow cannabis in accordance with Health Canada regulations, it has been suggested that on average businesses are spending anywhere from half a million Canadian dollars to several millions or more to comply with the government requirement before product can be produced and sold. Therefore, under a strictly capital costs analysis, it would appear that Health Canada and government regulators favour the bigger operators, given that personal production licenses under the ACMPR cannot be used for commercial purposes.

Under the ACMPR, Licensed Producers are the only legal source for cannabis distribution recognized by Health Canada and permitted under the laws of Canada. LPs have the exclusive legal right to grow, process and sell dried medical cannabis flower and cannabis oils to registered patients. Once a patient is approved by Health Canada to produce their own medical cannabis, starter materials (seeds/clones) must be purchased from a Licensed Producer. Some clones were initially being sold for as much as $750.00 by some LP’s which is ridiculous when clones on the black market can sell for as low as $5.00 CAD (or are given away for free. That’s right, free).

A monopoly or oligarchy of any industry is never in the public’s best interest. Competitors keep businesses accountable, for quality, price and value. While LPs have a legal monopoly over cannabis, they lack accountability to patients. Additionally, LPs are currently allowed to state their price independent of any government limitation. Some patients also believe that the quality of LP’s product is compromised by arduous and arbitrary government regulations. With a legal cannabis monopoly by LPs, a cannabis black market will still exist due to discrepancies in price, variety and quality.

The LP model is at best described as restrictive because LPs will only dispense cannabis to a Canadian who has a medical document from a medical doctor or nurse practitioner. Under the current law, cannabis acquired from any source is illegal, meaning all dispensaries and proprietors selling unlicensed or unregulated cannabis are doing so illegally.

To legally obtain cannabis (for personal medical purposes, of course) the prospective patient will need to see a medical doctor and obtain a “recommendation” (not a prescription–more on this in future instalments of North of the 49th Parallel). The physician-issued recommendation sets out the nominal amount of cannabis that a person can grow in their home (or designated area). The recommendation is good for one year and requires an annual renewal.

As a result of the restrictive nature of the LP system, and limited number of physicians willing to write a medical document, demand for cannabis by Canadians has led to a proliferation of store front cannabis dispensaries, which under current Canadian law are illegal. Regarding cannabis dispensaries in Canada, I will be writing a special “Dispensaries Edition” of North of the 49th Parallel with Ms. Jamie Shaw, the Former Vice President of the Canadian Association of Medical Cannabis Dispensaries (CAMCD) and the only court recognized dispensary expert in Canada. Be on the look out for that instalment in ‘Grow Magazine’ later this summer or autumn 2017.

With respect to where we are presently with the law under Prime Minister Trudeau, we need to consider the Liberal government’s promise of recreational legalization and the present government players who are brokering cannabis policies to be adopted as part of Canadian legalization.

THE PROMISE OF CANNABIS LEGALIZATION

The promise to legalize cannabis was a component of Canadian Prime Minister Justin Trudeau’s election campaign. The Prime Minister assumed office in November 2015 and this past December, the Canadian government has issued that regulations for recreational cannabis will supposedly be in place by early 2019, but no draft legislation has been tabled to date.

Bill Blair, current Parliamentary Secretary to the Minister of Justice, and former police chief of Toronto has been appointed to oversee the recreational cannabis legalization transition in Canada. Many consider this appointment objectionable at best due to his professional history. There is enough scandal written about Bill Blair online, especially regarding the policing of protests during the G20 Summit in Toronto on June 25 to June 26, 2010. Interesting, but let’s move on.

To hash out the details of legalization, the Canadian government created a Federal Task Force on Cannabis Legalization, led by former Deputy Prime Minister, the Honourable Anne McLellan. The Task Force team has been described by officials as representing an impressive breadth of experience and accomplishments in the areas of law, substance abuse, medicine and policing. Critics, however, describe the Task Force merely as a sham and regard some Task Force members as “industry insiders” who have designed a legal framework designed to be unduly difficult.

It was reported that only two (2) per cent of LP applications submitted to Health Canada have been successful which also accounts for the explosion of unlicensed operators, which are undercutting the over-regulated and expensive federal program. Additionally, the Task Force Chair Anne McLellan is a special advisor to the Toronto Bay Street law firm Bennett Jones, which advertises and promotes itself as the “go-to” law firm for government-backed Licensed Producers.

The Task Force under McLellan recently released a report entitled: “A Framework for the Legalization and Regulation of Cannabis in Canada: The Final Report of the Task Force on Cannabis Legalization and Regulation.” This report provides a list of 80 recommendations. There is immense speculation on how the Canadian cannabis industry will evolve and be defined within these new regulations.

However, despite the move towards legalization, in 2014, the most recent year for which data is available according to the Canadian Broadcast Corporation, there were 57,314.00 marijuana possession-related “incidents” reported by police nationwide as per data available from Statistics Canada. Further data suggests more than 24,540.00 people were charged as a result in 2014, while in 2013 it was presented that 25,819.00 Canadians faced charges. As of February 6, 2016 Dankr.ca reports that there have been 141 dispensaries raided across Canada since the Prime Minister took office.

In short, the Trudeau government’s promise to begin the process of legalizing recreational cannabis in 2019 has done nothing but amplify calls from lawyers and advocates for an end to arrests and prosecutions for cannabis related crimes. These arrests have clogged up the Canadian court system and left tens of thousands of Canadians with a criminal record, even with legalization looming. If legalization is coming, then why are arrests continuing? It could be more to do with the design of what the Liberal party had in mind for a cannabis market monopoly.

CONCLUSION – CANNABIS PROHIBITION 2.0

Despite the efforts of Canada to be the first G7 nation to have national legal cannabis program in place, the current Canadian law and future speculative regulations are limited and designed to facilitate government administration over patient ease and common sense. What is coming is not the “legalization” of recreational cannabis but can be more appropriately described as “Cannabis Prohibition 2.0.”

We have covered much ground with this installment, but there will be much more on the theme of ‘Prohibition 2.0’ to follow in future installments of “North of the 49th Parallel”. Now, if there is a particular Canadian cannabis topic you would like clarification on, please feel free to contact me by email at: rob@adlucemlaw.com.

Thank you for joining us for this installment (“What’s Happening Up North, Eh!”) and please stayed tuned for more ‘Cannabis News and Legal Commentary from Canada’ with Robert W.E. Laurie, Barrister & Solicitor.

Newsletter

Sign up for our email newsletter!
[gravityform id=”1″ title=”false” description=”false”]