This week both Switzerland and Luxembourg have announced changes to cannabis regulation.
Both Switzerland and Luxembourg have been signaling that legislation changes surrounding cannabis would be implemented but have delayed implementation up until this week, when Switzerland announced recreational and medical cannabis will be legalised, and Luxembourg announced it would allow home cultivation.
The moves have been catalysed by the desire to protect youth and move consumers away from the black market.
Changes in Switzerland
In Switzerland, the Social Security and Public Health Commission of the Council of States (CSSS-E) has said it is lifting the ban on cannabis and reviewing regulations relating to cannabis cultivation, production, trade and consumption.
The changes were approved by nine votes to two, with the CSSS-E supporting the initiative saying that it will be “regulating the cannabis market to better protect young people and consumers”, enabling legislative work to begin to create a regulated market. It aims to stem the black market and ensure that only cannabis which has been checked for quality is available.
The CSSS-E has said it is essential that the National Council takes into account the results of the pilot projects underway on the non-medical use of cannabis, citing that “the international context must also be taken into account.”
Changes in Luxemburg
Luxembourg announced plans to legalise recreational cannabis three years ago but has delayed on the matter. However, the country made the announcement on Friday (22 October) that citizens would be able to cultivate cannabis at home for personal use.
The deal struck in 2018 set the stage for legislation of recreational cannabis to be drawn up with the goal of impunity or legalisation regarding production in the country, as well consumption of cannabis for personal use, and for a national production and sales chain to be introduced under state control, with product quality assurance.
The deal said that the revenues from cannabis sales would be given priority into prevention, education and healthcare, and invested in the field of addiction.
The new announcement set out that citizens would be able to grow up to four plants, and that seed trade would be allowed, however, public consumption of cannabis remains illegal.
NGOs call on INCB for transparency on cannabis initiative
Two letters have called for transparency and accountability on the INCB’s Cannabis Initiative Guidelines effort.
181 Non-Governmental Organisations (NGOs) have penned an open letter on the first anniversary of the UN cannabis vote raising concerns about international cannabis policy.
The letters raise concerns regarding how cannabis policy resulting from the down-grading of international cannabis prohibition is unfolding. The first letter has been addressed to INCB President, Jagjit Pavadi, and the second to UN Secretary-General, António Guterres.
The International Narcotics Control Board (INCB) is creating documentation inside the drug control system to facilitate worldwide medicinal cannabis trade and research. However, in a statement the NGO’s have said that: “The proposed global Cannabis Guidelines and the drafting process itself seem to contradict last year’s key scheduling vote by favouring an increase of restrictions.”
The letter highlights that the guidelines will orient and shape governments’ regulations, impacting the lives of many patients and farmers across the globe and undermining the work of doctors, health authorities, and many others.
The statement says: “INCB’s rogue initiative threatens trust in a functioning legal order affirmed on 2 December 2020. These letters spell out how we as civil society stakeholders want to help the INCB meet the challenges of our world. This is why we have compiled proposals inspired by successful working methods of the broader UN family. Our suggestions are summed up in six recommendations:
– Disclose INCB documentation like other similar UN bodies;
– Opt-in to the UN online documentation access and archival system;
– Extend the civil society consultations to all areas of work of the Board;
– Call for and collect written contributions from non-State actors;
– Allow NGOs and non-State actors to participate as observers in INCB meetings;
– Scale-up “country visits,” inspired in the human rights treaty bodies Annual Review Mechanism.
“Last year on this day, UN took the bold step of removing cannabis from the strictest Schedule of the 1961 narcotic drug Convention treaty, six decades after its placement, recognising the therapeutic value of this ancient medicinal plant and no longer considering it as “particularly liable to abuse and to produce ill effects.” The vote followed an independent scientific WHO assessment which reviewed evidence and multi-stakeholder testimonials from all corners of the world.
“Conversely, since 2020, INCB has been developing its Guidelines in complete opacity raising concerns about the legitimacy and scope of the process, a fuzzy mandate, and risks of conflicts of interest. While not binding, these Guidelines will impact and shape regulations of cultivation, trade, production, and use of a traditional, herbal medicine and a plant indigenous to many regions of the world. It risks becoming a standard, particularly among smaller nations with less capacity to establish their own regulations.
“Our organisations strive for global health, human rights, and sustainability. We recognise INCB’s importance in helping governments ensure access to and availability of controlled medicines for all patients in need but INCB alone can not shape the economic, social, environmental, and cultural future of our communities.”
Money laundering challenges for cannabis businesses
What do cannabis businesses need to know when it comes to off-shore dealings and the risk of prosecution for proceeds of crime?
Wayne Atkinson, group partner at Collas Crill, discusses the complex criminal law surrounding cannabis businesses, and how the Bailiwick of Guernsey’s new position on proceeds of crime is attracting cannabis investors to the island.
In Shakespeare’s Measure for Measure, Escalus, a lord, questions Pompey, a pimp, on his profession and asks him “is it a lawful trade?” Pompey replies, in a response beloved of well-read lawyers everywhere that it would be “If the law would allow it, sir.”
At its heart, this 400-year-old exchange and the question “is my trade lawful?”, is a question that will be a familiar one to many in the global cannabis industry, with recreational business becoming increasingly globally accepted in many nations but off the table in many others, and with varying levels of acceptable content and medical licensing requirements in different jurisdictions. This becomes even more of a challenge when one looks to use another jurisdiction, such as an offshore finance centre to assist with international structuring.
Almost everyone reading this will be familiar at some level with obligations to prevent money laundering and ensure people do not profit from the proceeds of crime. Of course, preventing this requires us to answer again the question: “What is a crime?”
In many jurisdictions, laws relating to money laundering and the proceeds of crime attempt to impose their own standard on worldwide behaviour. Some jurisdictions for example talk (amongst other things) about conduct that constitutes a criminal offence under the laws of that jurisdiction, or which would constitute such an offence if it were to take place there. This is intended to ensure actions criminalised by particularly chaotic or despotic regimes in isolation do not get captured within the proceeds of crime regime. By taking this view, however, jurisdictions are imposing their own criminal system onto actions that are perfectly legal where they are committed, which is a tricky area, particularly with cannabis.
Imagine a situation where a business takes the best legal advice on offer in respect of its conduct in a specific country and is told everything is legal, but once that company pays a dividend to an investor in another jurisdiction that investor is considered to have “received the proceeds of crime”. This seems unduly harsh on the investor who has invested in what Pompey would call a “lawful trade”. Harsher still would be sanctions against that investor’s local bank, which failed to report that the monies it received for the investor were the proceeds of crime.
Put in this situation, many financial services businesses feel they have no option but to throw the baby out with the bathwater and decline business which they feel is close to the line. The cost of cross-border legal analysis and the risk of sanction is simply too great to ignore. In some offshore jurisdictions, the position is even clearer – all cannabis business is off the table.
Happily, recent legislative guidance from my own jurisdiction, Guernsey, has clarified our position and provided local service providers with the comfort they need to move forwards in this space.
Last year, the Guernsey Policy and Resources Committee (effectively our equivalent of a Home Office), issued an Information Notice on Cannabis Cultivation and Production in Other Jurisdictions. That note helpfully clarified Guernsey’s own position, making clear that where drug-related conduct outside Guernsey generates proceeds, those proceeds only fall within the scope of our Drug Trafficking Law if the conduct that generated them is unlawful in the jurisdiction where it took place (subject to some limited exemptions not relevant to cannabis).
This test of requiring an offence to have been committed in both jurisdictions is known as dual criminality and is obviously tremendously helpful in allowing for the proceeds of cannabis business (and other businesses involving potentially unlawful drugs such as psilocybin-producing fungi).
Going back to Pompey’s lawful trade, even this position can be confusing when one considers how complicated criminal law can be in and of itself. The same action could be lawful or unlawful depending upon one’s possession of a licence. Is it reasonable to expect offshore banks to distinguish between medicinal cannabis production in Canada, decriminalised cannabis production in California, hemp oil production in Suffolk and a hydroponic cannabis farm in an industrial part of London? All of these examples place a different legal analysis on the cultivation of plants of the genus Cannabis.
Meanwhile florists in the UK frequently produce bouquets featuring the dried seed head of the opium poppy, Papaver somniferum, which is the same plant used to produce heroin in Afghanistan, but which has also been widely grown in Tasmania since the sixties for the lawful production of morphine and codeine. Gardeners in the UK can readily acquire opium poppy seed from major seed companies to beautify their borders and, by the way, that lemon and poppy seed muffin you are enjoying whilst you read this? Same poppy! The law is complicated.
To assist with this concern HM Procureur, Guernsey’s equivalent of an Attorney General, issued guidance making clear the Law Officers would only prosecute money laundering offences in respect of the proceeds of cannabis business where:
- That business is illegal in the foreign jurisdiction in which it is operated; and
- The person involved had actual knowledge or suspicion that the proceeds of the Target Business are the proceeds of cultivation or production of cannabis-related activities which are unlawful where it occurs.
Whilst broader regulatory obligations in Guernsey still require businesses to make an effort to understand the legality of the business in question, this gives comfort around the risk of prosecution for an innocent mistake.
The combination of these two clarifications means Guernsey’s institutions are increasingly open to cannabis business and we are already seeing investment funds formed in Guernsey specifically to invest into the sector. With Guernsey offering a well-regulated, efficient and easy-to-use company law regime ideally placed for outward investment globally, it is easy to see why this pragmatic and sensible guidance has led to it becoming the go-to offshore jurisdiction for businesses in the sector.
Brexit: the perfect opportunity for UK to be centre of European cannabis
A new report from Volteface says the UK should seize the medical cannabis opportunity and create a cannabis Tsar.
Drug policy reform group, Volteface, has called on Boris Johnson to take control of the medical cannabis and CBD market to provide an economic boost for the UK.
The Volteface report entitled ‘The new leaf: beyond Brexit, countering COVID‘, which features a foreword from the Adam Smith Institute, has called attention to the economic benefits of engaging with growing cannabis markets. Stressing that the UK will need to move quickly, it estimates that the medical cannabis market could reach up to £1.2bn, creating 41,000 direct jobs and a further 17,000 supporting jobs.
So far, the UK has taken some steps to embrace the sector, with a number of cannabis companies listing on the LSE. However, the report highlights that, with the CBD wellness market forecast to reach £1bn by 2025, outdated licensing regimes mean that the UK is missing out on the medical cannabis opportunity.
Speaking with Cannabis Wealth, Katya Kowalski of Volteface said that now that Brexit is in place, it creates the perfect opportunity for the UK to become the centre of European cannabis.
She said: “It frees us from direct EU regulations and restrictions. Countries like Switzerland are allowed to operate much more freely in the medical cannabis and CBD space. This would allow the UK to operate on its own and independently. It leaves us in a place where we can take control of the industry and ownership.
“It is a really important sector to expand quickly. Medical cannabis was legalised three years ago and while we have seen progress from the industry side, patient access is still really limited. It is important to expand quickly to make sure patients are getting access to the medicine they need.”
German political parties working in coalition announced that adult use cannabis will be legalised for sale in licensed premises and taxed accordingly. It makes Germany the first major European country to recognise this growing industry.
“Competition is increasing across Europe. Germany has now put plans in place to legalise recreational cannabis and there is an ongoing Danish pilot programme for building an evidence base around medical cannabis. France is also doing something similar. We are seeing a lot of moves across Europe to really expand and take on medical cannabis as a growing industry,” said Kowalski.
Could the German announcement put further pressure on Boris Johnson to make changes in the UK? Kowalski hopes that this is the case.
“It should, and hopefully will, put pressure on Boris Johnson to see the benefits of medical cannabis. We mentioned in our report that there is a predicted estimated value of £1.2bn with thousands of new jobs. This should bring medical cannabis into perspective around it being a viable economic opportunity.”
Such economic opportunity would help with recouping financial losses following a series of lockdowns across the UK in 2020 and early 2021. Kowalski highlighted that this would be especially important around the creation of jobs following the furlough scheme which ended in September 2021. The Coronavirus Job Retention Scheme, often referred to as ‘furlough’, supported the wages of more than 11.7 million people since 1 March 2020 at a cost of more than £70bn.
“The report estimated that we could get 41,000 jobs specifically in the medical cannabis industry with a further 17,000 ancillary jobs. It is not just about economic or investment opportunities, but a wide array of job creation. That is something that has been really lacking in the UK with the furlough scheme and people losing their jobs.
“It is important to discuss that cannabis is a really interdisciplinary sector which can seem quite niche from the outside. The opportunities in the industry are so vast that you could have quite low-skilled to high-level positions including agricultural to lab-based jobs. It is not just the ancillary jobs but also positions in the industries that may collaborate with the cannabis space.”
The report suggested the appointment of a separate government body that deals solely with cannabis would streamline the process of applications in turn speeding up the industry.
Katya continued: “The next steps need to be a policy framework put in place in the UK. One of the key recommendations in the report is that a cannabis Tsar or a government body should be put in place to oversee the medical cannabis expansion. At the moment, all regulatory matters go to the home office which is quite tiresome and slow.
“The home office doesn’t really know how to deal with these issues so having a separate governmental body would really help to streamline this approach and speed up the process. Also, raising the THC percentage of CBD that is allowed to be extracted from hemp up to 1 per cent from 0.2 per cent would maximise the yield and expand the market.”
Kowalski also drew attention to the importance of not forgetting patient involvement as there is no industry without patients.
She concluded: “It is really important to not lose sight of why we are all in this space and what is at the heart of this industry, which is patient access. Expanding the evidence base for cannabis products is important to expanding patient access. We need to make doctors more comfortable with prescribing. We need to amend those regulations too so expanding the evidence base with investment into the sector is absolutely key.”