Lexpert Magazine

June 2018

Lexpert magazine features articles and columns on developments in legal practice management, deals and lawsuits of interest in Canada, the law and business issues of interest to legal professionals and businesses that purchase legal services.

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56 LEXPERT MAGAZINE | JUNE 2018 | CANNABIS BUSINESS | co-head of Bennett Jones LLP cannabis practice, who has been involved in the in- dustry for the last five years. "But no one predicted it would get this big this fast." So much so that Canada boasts more than 90 publicly-listed cannabis compa- nies. "e four companies on the TSX alone have a $14 billion market cap," says Mark Trachuk, the Toronto-based chair of Osler, Hoskin & Harcourt LLP's corporate practice group. "Cannabis companies are on everyone's radar, although they started from nothing just 18 months ago." To some extent, however, there is a "seen this before" feeling among some lawyers. "From a legal perspective, cannabis will have many of the aspects of mining, oil and gas, life sciences, and even high tech," says Trachuk's Toronto colleague Michael Watts. However that may be, medical mar- ijuana has been legal since 2001, when the feds allowed prescription sales. Between 2015 and 2017, the number of patients re- sorting to cannabidiol (CBD), one of the plant's active ingredients, to soothe pain — and particularly pain from cancer — rose from 23,950 to 201,398. And those were just the registered users, whose numbers are estimated to rise to over 400,000 by 2024. At press time, legislation legalizing rec- reational cannabis looked like it would be coming into force in September 2018. Casual users will be getting their highs from tetrahydrocannabinol (THC), one of weed's many active components. Beacon Securities has estimated that retail sales in Canada, where recreational cannabis use ranks among the highest in the world, will land in the C$7 billion to C$12 billion In the private sector, Shoppers Drug Mart has signed four deals to ensure an ad- equate supply of medical cannabis. On the recreational side, Second Cup has entered a strategic alliance with National Access Cannabis, a marijuana clinic, that will see some of the chain's coffee shops converted to cannabis dispensaries and pot lounges in provinces, like British Columbia, that will allow licensed private businesses to do so. And Phil Fontaine, a former national chief of the Assembly of First Nations and politician who is now CEO of Indigenous Roots, a medical marijuana company op- erated by First Nations, has stated publicly that cannabis businesses represent "tre- mendous" and "unique" potential for In- digenous peoples. e upshot is that much more than the regulatory arena will engage lawyers. at's because certainty in virtually all areas of cannabis-related law is at a considerable premium for practitioners and clients alike. e uncertainty assures that the demand for legal advice will not abate soon. Indeed, the University of Ottawa has already an- nounced cannabis law-related courses in both languages for its 2018-19 curriculum. No surprise, then, that a host of Canadian law firms have set out to make a name for themselves in this burgeoning industry. "e opportunities for lawyers are limit- less, engaging everything a law firm can offer," says McMillan's Munro. "But it all depends on the degree of commitment that a law firm makes to the industry." Munro believes that "the world is watch- ing" to see how Canada implements canna- bis liberalization. "If your investment the- sis is that this is a world-wide movement, Canada is the perfect sandbox for perfect- ing your product," he says. "e only other comparable is Uruguay and that puts Ca- nadian law firms on the global stage with a once-in-a-generation opportunity." e sandbox, it appears, is already in play. Canada's capital markets look like they might be as tempting a venue for US range in annual sales. A preponderance of these revenues are expected to come from encroachment on Canada's $7 billion black market. e experience in California suggests that's not unrealistic: a 2016 study from ER A Economics has estimated that suppliers there sold US$1 billion worth of canna- bis to legal users and US$20 billion to illegal buyers. Canada's most significant cannabis pro- ducers began as medical marijuana produc- ers. And that's where many analysts say the real growth lies, especially on the in- ternational front. ey point to places like Germany, where pharmacists can prescribe health-insurance covered cannabis, and to the ever-expanding research that portends new markets on the medical side. For ex- ample, the World Doping Agency recently removed CBD from its list of banned sub- stances, opening the door for companies like US-based Corix Bioscience Inc. to explore the sale of THC-free CBD prod- ucts to athletes dealing with pain and in- flammation issues. "Canada is a first mover here, so the international opportunities are significant," Dhillon says. "e Euro- pean market in particular is fuelling a lot of growth." Weed mania, then, has spread through- out the Canadian economy. Quebec, On- tario, Prince Edward Island, Nova Scotia and New Brunswick governments have appropriated retail sales of recreational marijuana to themselves, with the re- maining provinces allowing private sec- tor retail distribution. In the public sector, Gatineau-based Hy- dropothecary Corp. has signed a five-year, 200 metric ton supply deal with Société Québécoise du cannabis, the newly formed sister to the provinces liquor distributor, Société des alcools du Québec. e Liquor Control Board of Ontario, meanwhile, has announced the location of its first 40 stores in 14 cities, and anticipates that it will have 150 standalone marijuana stores by 2020. "THE LEGALIZATION OF CANNABIS IS BIGGER THAN THE END OF PROHIBITION, IT'S MORE AKIN TO GRAIN BECOMING LEGALIZED AND REGULATED" JAMES MUNRO > MCMILLAN LLP

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