By any measure, cannabis has become a major industry, and global financial markets anticipate big profits in the future. The first Canadian regulated, licensed, publicly traded cannabis producer went public on May 24, 2018, and, less than a year later, is already a USD $15 billion company. Another Canadian producer has tripled in market capitalization since its July 2018 IPO and is now valued at nearly USD $7 billion. Governments are also recognizing the potential to generate needed revenue from taxing cannabis transactions. For example, in the United States, Colorado and Washington, which were the first two U.S. states to legalize recreational use, collected nearly $250 million and $320 million respectively in cannabis-related taxes and fees in 2017.
However, to reach their potential, these companies, their investors, and any that follow their lead will have to overcome a regulatory environment determined to make it as difficult as possible. To say that cannabis law is complicated and inconsistent would be an understatement. In the United States, many states have decided to legalize or permit some form of cannabis. But at the federal level, it remains a Schedule I controlled substance, with the threat of severe criminal penalties for those who manufacture, distribute, or possess it, as well as for those who receive the proceeds of such acts. Nevertheless, the Attorney General recently said that, absent certain aggravating factors, the Department of Justice will not prosecute those who are compliant with state laws and Congress has prohibited the use of federal funds for the prosecution of those who comply with state medical marijuana laws. And, in December, Congress passed the 2018 Farm Bill which decriminalizes industrial hemp. Yet, the federal government has not yet adopted all the necessary regulations to make hemp completely legal, leaving its status somewhat ambiguous.
Things are no simpler at the international level. The 1961 UN Single Convention on Narcotic Drugs obliges state parties to “adopt such measures as may be necessary to prevent the misuse of, and illicit traffic in, the leaves of the cannabis plant” and classifies cannabis as both a Schedule I and Schedule IV drug, requiring special controls. Yet, Canada (a signatory to the Convention) recently legalized recreational cannabis. In 2001, Portugal (also a signatory to the Convention) decriminalized all drugs, including cannabis. In many other countries, however, selling marijuana remains a serious crime and in some it is even punishable by death.
Therefore, the cannabis industry presents extremely high legal risks for those who do not fully understand all the relevant laws in all the jurisdictions in which they operate. Drawing on Baker McKenzie’s global network, this blog will help readers to navigate this complicated web of regulations and exploit the legal opportunities offered by the industry internationally, while staying on the right side of the law. In addition to explaining the law as it is, it will share best practices in compliance and will also cover enforcement trends and proposals for legislative reform throughout the world.
We hope that readers will find it useful and we welcome feedback and suggestions.