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Canada’s proposed Cannabis Act: A summary

Cannabis ActCanadians have been anticipating the legalization of cannabis since it formed part of the Liberal Party of Canada platform in the 2015 federal election campaign. On Thursday, April 13, 2017, the Government of Canada made a significant step towards enacting the platform promise when it tabled draft legislation—the Cannabis Act (the “Act”). The Act overhauls Canadian criminal legislation pertaining to the sale of cannabis and sets out a legal framework for its production, distribution and possession. The Government has indicated that it intends for the Act to come into force before July 2018.

The Act represents the most recent step in the Government’s ongoing plan to legalize and restrict access to cannabis. In the 2015 Speech From the Throne, the Government announced that it would introduce legislation to legalize, regulate and restrict access to cannabis. On June 30, 2016, the Government launched a Task Force to investigate and advise on the design of a legislative and regulatory framework for legal access to cannabis. The Task Force released its Report on November 30, 2016 (the “Task Force Report”), many recommendations from which are reflected in the draft legislation.

The objectives of the proposed Act generally are to provide adults aged 18 and older with legal access to quality-controlled cannabis, and to preserve and enhance public health and safety. Contemporaneous with its proposed legislative change, the Government plans to strengthen laws on alcohol and cannabis-impaired driving.

These are the 10 most notable aims of the Act:

  1. Control quality and restrict access to legal cannabis. The Act distinguishes between illicit cannabis—being cannabis sold, produced or distributed illegally outside the rules of the Act—and cannabis produced and distributed in compliance with the Act. Adults aged 18 and older may possess up to 30 grams of legal cannabis, purchase cannabis from a provincially licenced retailer or from a federally licenced online storefront, and grow up to four cannabis plants at home. Under the proposed Act, there remains a criminal prohibition against adults aged 18 and older knowingly possessing any amount of illicit cannabis. The Act contemplates that the Minister of Health (the “Minister”) will have the power to issue licences and permits allowing persons to carry out certain commercial activities in respect of cannabis. These activities include the testing, packaging, labelling, sending, delivery, transportation, sale, possession or disposal of cannabis. The Minister may refuse to issue or renew an application for a licence or permit on various grounds, such as where the Minister reasonably identifies a risk to public health and safety. Licences and permits authorizing the import and export of cannabis may be issued for cannabis in respect of medical or scientific purposes, or industrial hemp.
  2. Transition medical cannabis licences. Significantly, the Act deems licences, import and export permits and security clearances issued under the Access to Cannabis for Medical Purposes Regulations (“ACMPR”) to be commercial licences issued by the Minister under the proposed Act. This feature of the Act will create regulatory continuity for existing ‘Licenced Producers’ of medical cannabis to operate within the new regime. Applicants in the process of applying for a licence and associated security clearances under the ACMPR likewise will have their applications deemed to be applications made under the new regime.
  3. Establish sanctions, enforcement measures and criminal penalties. The Act proposes to make certain amendments to the Controlled Drugs and Substances Act and the Criminal Code, such that cannabis-related penalties are made proportionate with the seriousness of the offence. The Act allows the police to sanction less serious breaches of the Act, such as possessing over 30 grams but not more than 50 grams of dried cannabis, through a ticketing system. Adults engaging in more serious offences, such as possessing illicit cannabis or possessing excessive cannabis in a public place, are liable to imprisonment. The Act imposes stricter sanctions on adults illegally distributing or selling cannabis, such as by distributing or selling to youth or organizations (which may not possess cannabis), or by distributing or selling illicit cannabis. The Act further provides for a robust system of property seizures.
  4. Create administrative monetary penalties and director and officer liability. Part 10 of the Act provides for administrative monetary penalties (“AMPs”) of up to $1,000,000 to be levied against persons who contravene the non-criminal provisions of the Act. Significantly, each day that a violation of the Act continues will result in a new violation. The Act also contains several measures to deem corporate directors, officers, agents and mandataries to be parties to any violations of the Act which they directed, authorized, assented to, acquiesced or participated in, regardless of whether or not they were actively involved in committing the offence. While the Act does expressly import common law excuses, it expressly states that persons named in a notice of violation will not have access to either a due diligence defence or a defence based on reasonable and honest belief of facts.
  5. Provide for seizures and forfeitures of property. The Act provides for robust powers of seizure of property believed on reasonable grounds to be related to a contravention of the Act as well as the forfeiture of property, including dwelling homes, related to the commission of a designated offence under the Act. Lenders should take note of the provisions of the Act protecting the interests of non-complicit third parties who have exercised all reasonable care as well as the capability to apply for an order declaring a mortgage, charge, prior claim, lien or security interest to be unaffected by the forfeiture.[1]
  6. Permit the establishment of a supply chain tracking system. The Minister may acquire information, subject to the Privacy Act, in order to establish and maintain a national tracking system for cannabis. The goals of a tracking system are to prevent cannabis from being diverted to an illicit market and to prevent illicit cannabis from entering into the supply of the legal market.
  7. Restrict access to youth. Persons may not sell or distribute cannabis to youth under the age of 18. Working to restrict access to cannabis, the Act strictly prohibits any promotions directed at youth, and packaging and labelling appealing to youth. The Act also prohibits sellers from selling cannabis through self-service displays or vending machines.
  8. Regulate promotion. Only persons authorized to produce, sell or distribute cannabis may promote cannabis and they may do so for informational or brand-preference purposes. The Act provides for strict rules on what authorized sellers may include on packages and labels for cannabis. Among other things, packages and labels may not depict a person or character, evoke a positive or negative emotion about a way of life associated with cannabis use, or communicate health effects associated with cannabis.
  9. Restrict mixed products. The Act restricts the sale of any substance that contains a mixture of cannabis and nicotine, caffeine or ethyl alcohol.
  10. Establish a role for the provinces and territories. The Act generally authorizes provinces and territories to licence and oversee the distribution and sale of cannabis, subject to federal conditions set forth in the Act. Notably, the Act leaves room for provinces and territories to:
    1. adjust upwards the minimum age, such as in accordance with the minimum age for consuming alcohol;
    2. lower the personal possession quantity limit, create additional rules for growing cannabis at home and add restrictions on where adults may consume cannabis;
    3. determine if retailers are permitted or prohibited from co-locating sale of legal cannabis with sale of alcohol or other goods; and
    4. determine pricing and provincial taxation of cannabis and licences or permits.[2]

While the Act sets forth a strong legal framework for the legalization of cannabis in Canada and sets a date for the regime to come into force, it will remain subject to refinement as it moves through committee. Much of the flesh of the regime will come with regulations governing the classes of cannabis and the particulars of the licencing and permitting requirements contemplated in the Act. The pressure will be on each province to formalize additional rules governing distribution and access that fit within the draft legislation.

By: Awanish Sinha and Matthew Kelleher

[1] Where a person is convicted or discharged of a designated offence under the Act, sections 94 and 95 of the Act allow the Attorney General to seek a forfeiture order against non-chemical offence-related property. A court may grant such an order either if it is satisfied: (1) on a balance of probabilities, that the non-chemical offence-related property was related to the commission of the offence; or (2) beyond a reasonable doubt that the property is nonchemical offence-related property, even where the property is unrelated to the offence. Significantly, an order may be issued in respect of property outside of Canada. Lenders will have recourse to two provisions to prevent the forfeiture of property in which they have an interest. First, before making a forfeiture order, under section 97, a court must give parties who have a valid interest or right in the property notice of the forfeiture proceeding and an opportunity to be heard. Second, even if the forfeiture order is made, a lender will have thirty days after the forfeiture to apply in writing for an order that the interest or right of the lender is not affected by the forfeiture—in
such case, the lender will have to prove that it was not complicit in the designated offence and that it exercised all reasonable care to be satisfied that the property was not likely to have been used in connection with the commission of an unlawful act.

[2] The Act is silent on pricing and taxation of cannabis. The Government may introduce more information on federal taxation plans in the future.

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McCarthy Tétrault is a Canadian law firm that delivers integrated business law, litigation services, tax law, real property law, labour and employment law nationally and globally.McCarthy publishes a series of blogs to share information with companies to help them comply and manage their businesses. On the Inside Internal Controls blog we will share some of those blog posts sharing their expertise among others, in the areas of Competition/Anti-trust, Corporate and Commercial Law, Intellectual Property, Privacy, Environmental Law, Technology and Litigation. Read more
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