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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LEXPERT MAGAZINE | JUNE 2018 57 | CANNABIS BUSINESS | and international cannabis companies as they have historically been for mining com- panies. "We incorporated and listed our company in Canada largely because of the liquidity the Canadian cannabis market offers," says Jim Pakulis, who has been in- volved in the medical cannabis business in the US for at least a decade and is currently the president of Lifestyle Delivery Systems Inc., a California-based medical vertically- integrated cannabis producer. Similarly, Canadian companies are ex- panding worldwide. PharmaCielo Ltd., for example, is a global company privately held and headquartered in Canada that produces marijuana through a Colombian subsidiary. "Canada was selected as the ideal country in which to headquarter our global parent based on its high standards of financial accountability and regulatory oversight," says the company's website. "Additionally, Canada is lauded for its leadership in having established an innova- tive and highly regulated national medical cannabis industry." According to David Gordon, who sits on the PharmaCielo's board and is managing partner of public relations firm Cohn & Wolfe's Toronto office, it's all about repu- tation. "e word internationally is that if Canada does something well and experi- ences it well, perhaps others should look at it," he says. Sweden is one place where investors have taken a long look. In January 2018, Aurora and Canopy Growth were among the top 10 most traded shares on Nordnet, a Scan- dinavian online broker bank headquar- tered in Stockholm. e expectation is that regulatory, capital markets, mergers and acquisitions (M&A), and intellectual property (IP) will be the legal practice areas most fully engaged. But the reach of the industry is almost limitless. Advertising and marketing is tightly regulated. e prospect of workers coming to the job high presents new challenges for labour and employment specialists. Pro- tecting IP in the cannabis setting has its own unique twists. Leasing and franchise lawyers will have their hands full as com- mercial landlords and franchisees decide whether to permit cannabis-related busi- nesses or uses on their premises or among their franchisees. Commercial real estate evidence, good manufacturing practices, and compliance and enforcement. "It took at least ten years before HC got it right, and NHP regulation is still evolving," Hulton says. "Meanwhile, there were lots of ups and downs and sideways, and I think can- nabis will be a similarly wild ride." If cannabis follows the regulatory path of NHPs, it will be a while before the ket- tle builds up steam, but when it does, the whistle will be a loud, exponential one. By way of example, HC approved only 1,131 NHP product licenses and 145 site licenses in the period from 2001-2005, more than doubled that amount to 2,391 product li- censes and 473 site licenses in 2006, and more than doubled the ante again in 2007, with 5,260 total products and 619 sites ap- proved. By the end of 2008, the product licenses issued had grown to 10,675 and site licenses to 828; by the end of 2009, HC had issued 19,096 product licenses and 969 site licenses. Growth appeared to peak in 2010, when the numbers grew to 27,914 and 1,120 licenses, respectively. "I believe that the pace of regulatory change and the evolution of NHPs provide a good analogy for the expectations we should have for the cannabis regulatory process," Hulton says. ere's already evidence supporting this: in the next few months, some 200 new licensees should be joining the 94 al- ready in place. Familiarity and experience with the way HC works, then, is arguably invaluable to lawyers and firms advis- ing cannabis stakeholders. "Experience with HC is the only way you can navigate through the gray areas that will be repre- sentative of cannabis regulation over the next few years," Hulton says. And it will be a maze. Not only will there be multiple types of licenses, includ- ing licenses for research, testing, import and export, cultivation, processing and retail sales, but each approval may involve requirements relating to production, secu- rity, location, personnel, transportation, storage, and reporting and compliance with a proposed Cannabis Tracking Sys- tem. Making things even more complicat- ed is the fact that licenses will be tailored to the scale and type of operation that is the subject of an application. Further complicating the regulatory land- scape is the situation in the US, where federal law prohibits the use of marijuana practitioners will be dealing with the enor- mous demands for space required by pro- ducers and retailers. e insurance industry will have to re-assess risk and perhaps reformulate its health coverages to take into account the increasing number of Canadians who may seek CBD treatment (Sun Life has recently added medical marijuana to its employee benefit plan offerings); and immigration lawyers will be affected as they ponder the impact of pot-smoking Canadians seeking entry to the US, where federal law still pro- hibits marijuana use. Even criminal and constitutional coun- sel will find fodder as new offences hit the books at both the provincial and federal level and the usual squabble over the divi- sion of powers emerges. e proposed bi- furcated jurisdiction envisions the the feds, largely through Health Canada, maintain- ing jurisdiction over licensing, product approval, marketing and criminality, with much of the rest of the regulation remain- ing in the provinces' bailiwick. e upshot is that even municipal law is engaged. "So far the rules formulated by the provinces have been aimed mostly at distribution, and very little at produc- tion," says Mylany David in Langlois law- yers, LLP's Montreal office. "Consequently, confusion reigns everywhere in the absence of guidelines for municipal zoning regula- tions — and zoning issues are just the tip of the iceberg." e situation, David explains, is similar to the land use planning chaos that existed regarding wind farms some 15 years ago. However that may be, Langlois has pre- pared for the onslaught by creating a team of 15 lawyers who work together on canna- bis issues. At this point at least, the regulatory aspects dominate. As Wendy Hulton in Dickinson Wright LLP's Toronto office points out, the route to a modicum of regulatory cer- tainty for natural health products (NHP) — far less controversial than cannabis — was a tortuous one. It spanned the decade from 2001, when the first NHP dra regu- lations were formulated, to 2010, when HC announced how it would implement the Natural Health Products Program Advisory Committee's recommendations regarding core issues such as standards of

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