Questions To Lawyers And Business Professionals From Around The World: Cannabis Is Now Attracting Global Investors – What Are The Risks Of CBD Production And Sales…

The liberalisation of the cannabis industry and the relaxation
of legislation across Europe and North America has resulted in
phenomenal growth in cannabis sales. Globally, sales increased from
$21 billion in 2020 to $29 billion in 2021 and are expected to
reach $35 billion this year, according to Jason Wilson, cannabis
research and banking expert at ETF Managers Group. The result of
this huge spike in growth has spawned a list of start ups, IPOs and
M&As as businesses have taken advantage of the relaxation in
national laws.

In this excerpt from IR Global’s most recent publication,
legal advisors across multiple territories explain the risks of CBD
production and sales in their jurisdictions.

Brasil – Ricardo dos Santos de Almeida Vieira – Partner,
Barcellos Tucunduva Advogados

Despite recent regulatory advances, the cultivation and
commercialization of cannabis is prohibited in Brazil. It is
possible to import and manufacture “Cannabis Products”,
defined as industrialized products for medicinal purposes with
vegetable derivatives or phytopharmaceuticals from cannabis sativa
and the predominant presence of cannabidiol (CBD) and no more than
0.2% tetrahydrocannabinol (THC). Exceptionally, the product may
contain more than 0.2% THC if intended for palliative care for
patients with no therapeutic alternatives and in irreversible or
terminal clinical situations. Products outside these conditions can
only be imported, manufactured or marketed if registered as a
medicine/drug.

Non-medical cannabis products, such as cosmetics, smokables,
wellness products or food products, cannot be imported,
manufactured or commercialized in Brazil. It is not allowed to
cultivate cannabis in Brazil, but only to import the pharmaceutical
ingredient in the permitted form. It is also prohibited to import
or commercialize the plant or parts of the plant, even if it is
dried, crushed or pulverized, and even if it is available in
pharmaceutical form. If certain rules are observed, a company may
request authorization to import, distribute, and trade in Brazil,
either through the Health Authorization for Cannabis Products, a
faster process with a limited time frame for commercialization, or
through its registration as a medicine, under the same terms
applicable to medicines in general.

To this end, the Brazilian regulation created a special category
for Cannabis Products, distinguishable from medicines, drugs, and
other pharmaceutical inputs. This text addresses the so-called
Cannabis Products. Registration as a medicine follows specific
rules and a considerably more bureaucratic process.

France – Bruno Weil – WEIL & ASSOCIÉS

To date, the culture, manufacturing, transport, import/export,
detention, offer, transfer, acquisition and use of cannabis or its
varieties in France remains largely prohibited by the provisions of
the Code of Public Health (CPH), even though rare exceptions
exist.

The sale to consumers of raw flowers or leaves in any form,
alone or mixed with other ingredients, as well as their possession
by consumers or their consumption, is prohibited. However, products
with tetrahydrocannabinol (THC) of less than 0.3% are now
authorised for sale in France, which was not the case before.


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CBD is considered a novel food and therefore CBD and foodstuffs
containing it cannot be marketed without prior assessment and
authorisation by the European Food Safety Authority (EFSA). The
EFSA cannot currently outline its position on the safety of
cannabidiol as a novel food due to data gaps and uncertainties
about potential hazards related to CBD intake.

Since cannabis is still listed as a narcotic, the advertising is
currently limited to the experimentation of medical cannabis
only.

The unlawful transport, detention, offer, transfer, acquisition
or use of narcotic substances is punishable by:

  • 10 years’ imprisonment and a fine of EUR7.500.000 if
    committed by natural persons; or

  • 10 years’ imprisonment and a fine of EUR37.500.000 (and
    various other sanctions that lead to the entity’s dissolution)
    if committed by legal persons.

Germany – Margret Knitter – SKW Schwarz Rechtsanwälte

The main problem for producers and suppliers of CBD products is
that the question whether the product can be placed on the market
legally cannot be answered simply with yes or no. First, the
correct legal classification of the product is essential. Depending
on whether the products may be considered as narcotics, medicinal
products, medical devices, foods or cosmetics, there are different
regulatory requirements.

The first and biggest barrier to overcome is the German
Narcotics Act (“Betäubungsmittelgesetz” –
BtMG), which determines the national legal framework for the
marketability of cannabis and CBD products. According to its sect.
3 para. 1 no. 1 the intercourse with narcotics requires permission.
Thus, any unauthorized handling of narcotics is punishable by law.
While cannabis is a narcotic according to the BtMG, this does not
apply to CBD. However, foods containing CBD are currently
non-marketable because CBD is considered a so-called “novel
food” which requires approval. Since CBD has not yet been
approved as a novel food, such products therefore cannot be legally
placed on the market. Furthermore, the requirements of the Health
Claim Regulation (EU 1924/2006) must be observed, when the CBD
product is advertised with nutrition or health claims. As an
example, claims such as “high in Omega-3”, “may help
to relax” or “helps with insomnia, migraine etc.”
might be considered as nutrition or health claims. Health claims
are only permitted if they are approved in accordance with the
Regulation and included in the list of authorised claims. However,
this list does not include a specific health claim on CBD products.
Therefore, claiming that the CBD product may be beneficial for
someone’s health, may be problematic.

Japan – Kenji Kuroda – Kuroda Law Offices

The status of current CBD regulation is as described below, and
if CBD products (including raw materials, works-in-progress, and
semi-finished products) handled in Japan are even partially derived
from regulated parts of the cannabis plant (parts other than mature
stems or seeds), or contain THC even in trace amounts, there is a
risk that those involved in the production or sale thereof will be
punished, or if not punished, will be forced to discontinue or
recall the products. (It is expected that the above risks will be
reduced by the planned revisions to the laws and regulations in the
future.)

Furthermore, CBD products may be subject to strict regulations
as pharmaceuticals, depending on the future response of the
Ministry of Health, Labor and Welfare (MHLW).

In Japan, the manufacture and sale of pharmaceutical products is
strictly regulated by law, but products containing substances
listed in the List of Ingredients (Raw Materials) Used Exclusively
as Pharmaceutical Products set forth by the MHLW fall under the
category of pharmaceutical product and are subject to strict
regulations as pharmaceuticals regardless of whether advertised or
sold with the appearance of a pharmaceutical product (e.g., with an
indication of medicinal efficacy or dosage, or a
pharmaceutical-like shape or container, etc.).

Currently, CBD is not included in the list, but it cannot be
said that there is no possibility that it will be added in the
future, and if it is added there is a risk domestic production and
sales of nonpharmaceutical CBD products will be severely
restricted.

Malta – Kris Scicluna – AE Business Advisors

Malta has now de-criminalised the personal use of cannabis and
permits growth for personal use of (a max of 4) cannabis sativa
plants, to harvest weed, as well as the commercial production and
importation of non THC cannabis ( known as hemp) for medicinal
use.

The regime in Malta is one of the most progressive in the world
and is likely to develop. This will give rise to new commercial
opportunities. The risk is that some commercial operators will try
to jump the gun and do more than the law allows at any given
time.

Otherwise, the risk of penalty and sanction will be low for any
individual or entity observing and adhering to the licensing
requirements laid down in the Production of Cannabis for Medicinal
and Research Purposes Act (Chapter 578 of the Laws of Malta), and
of the law itself.

Thus, a licensed operator must adhere to detailed regulations on
quality-assurance, security, monitoring of the production facility,
import and export, storage and possession, reporting obligations,
and advertisement.

The storage and possession of the harvest from local cultivation
must satisfy the requirements set out in the relevant
legislation.

Each finished unit product pack shall display the respective
serial number, in a tamper-evident manner, as established by the
regulatory authority, prior to any transactions related to the
product. The advertisement of cannabis to the public as a treatment
for any medical condition is, in terms of the Medicines Authority
General Guidelines on the Production of cannabis for medicinal and
research purposes expressly prohibited.

Advertising the product in Malta would, therefore, appear to be
risky and unadvisable. There are, however, (EU) Single Market
issues to take into account for the Court of Justice of the
European Union, which interprets EU law, has ruled (C-663-18) that:
No Member State can preclude the advertisement of a CBD product
lawfully produced in another Member State in view of the fact that
CBD is not a ‘drug’ within the meaning of the Single
Convention of the United Nations, due to its lack of
‘psychoactive ingredient’

Netherlands – John Wolfs – Wolfs Advocaten

A first risk that may arise concerns the (incorrect) way in
which the effects of the CBD products are described. It happens
regularly that,…

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