Contributed By Torkin Manes LLP
There are both federal and provincial/territorial laws and regulations that govern the cannabis industry in Canada. In some instances, there are laws and regulations at the municipal level as well. Generally speaking, the federal government has the authority to regulate all aspects of the cannabis industry except for rules pertaining to sale, consumption and distribution, which are left to the provinces and territories, consistent with their constitutional jurisdiction over property and civil rights.
On 17 October 2018, the federal government enacted the Cannabis Act, which resulted in the legalisation of recreational-use cannabis across Canada.
According to the federal government, the Cannabis Act’s three stated objectives are to (i) keep cannabis out of the hands of young people, (ii) keep profits out of the pockets of criminals, and (iii) protect public health and safety by allowing adults to access legal cannabis.
To achieve these purposes, the statute creates a strict legal framework that encompasses both medical and non-medical cannabis in Canada, and prescribes the scope of all permissible products and cannabis-related activities, as well as the offences and penalties for non-compliance.
Since its enactment, the federal government has continued to refine the Cannabis Actto reflect the changing demands of this novel regulatory environment.
While the Cannabis Act is the primary piece of legislation that governs cannabis within the country, there are additional federal laws and regulations that touch upon the industry in various ways. These include:
To have a complete understanding of the regulatory framework of cannabis in Canada, one must be aware of the additional laws and regulations that each province and territory has enacted.
The following is a summary of the primary laws and regulations enacted by each province and territory.
In Alberta, cannabis practices are governed by the Gaming, Liquor and Cannabis Act (GLCA), and the Gaming, Liquor and Cannabis Regulation (GLCR).
The Alberta regulatory authorities have also published additional manuals and guidelines to assist with the implementation and administration of their regulatory framework.
British Columbia has enacted a number of laws and regulations including the following:
In addition to the above, the province has amended the Motor Vehicle Act to provide police with more tools to address and deter drug-affected driving.
In Manitoba, the Liquor, Gaming and Cannabis Control Act governs the distribution and sale of cannabis in the province, including on First Nations Reserves.
Legal cannabis in New Brunswick is administered under the Cannabis Control Act.
In addition, New Brunswick has enacted the Cannabis Education and Awareness Fund Act and the Cannabis Management Corporation Act.
Newfoundland and Labrador
To establish a governance structure for the distribution and possession in the province, Newfoundland and Labrador amended the Liquor Corporation Act, and enacted the Cannabis Control Act.
The province has also enacted the Cannabis Licensing and Operations Regulations.
The Northwest Territories has enacted the following to govern cannabis in their jurisdiction:
In Nova Scotia the Cannabis Control Actis the primary piece of legislation. However, the province has also enacted or amended the following supporting laws and regulations:
Cannabis practices in Nunavut are governed by the following:
There are a number of pieces of legislation governing cannabis in Ontario, including:
The province has also enacted the following regulations:
Prince Edward Island
In Prince Edward Island, the Cannabis Control Act and the Cannabis Management Corporation Act govern the cannabis industry in the province.
In addition, the Cannabis Control Regulations and Cannabis Management Corporation Regulations were enacted to assist in the administration and enforcement of the legal framework.
In Québec, the cannabis industry is regulated by the Cannabis Regulation Act, and the Act respecting the Société des alcools du Québec.
Cannabis production and distribution practices in Saskatchewan are governed by the Cannabis Control (Saskatchewan) Act, and the supporting Cannabis Control (Saskatchewan) Regulations.
In the Yukon, the government enacted the following pieces of legislation and regulations to oversee the territory’s cannabis industry:
Due to the division of legislative powers and responsibility between federal and provincial/territorial governments under the Canadian Constitution, there are both federal and provincial regulatory authorities that have been charged with enforcing the laws and regulations governing the industry.
These regulatory bodies work in conjunction with each other, and collectively share the responsibility of overseeing cannabis regulation across Canada.
At the federal level, the regulatory authority is Health Canada.
Pursuant to the Cannabis Act, Health Canada is enabled to set strict requirements for producers who grow and manufacture cannabis, and to establish industry-wide rules and standards covering various aspects of the industry, including licensing, permitted cannabis products, packaging and labelling, serving sizes, potency, ingredients, cultivation and marketing.
At the provincial/territorial level, the primary responsibility for provinces and territories is to determine and regulate how non-medical cannabis will be consumed, distributed and sold within their jurisdiction.
Each province and territory has created and enlisted a specific regulatory body to enforce the laws and regulations governing cannabis. The following are the provincial regulatory authorities:
In addition to the regulatory authorities, most provinces and territories have created and/or designated an exclusive authorised wholesaler for their province. The following are the only authorised wholesalers of legal recreational cannabis in their respective province and territory:
At this time, Saskatchewan is the only province that does not have an exclusive authorised provincial wholesaler. The province has instead, issued licences to private wholesalers in a similar manner to retail licensing.
As noted earlier, the provincial and territorial authorities are responsible for the development, implementation and enforcement of systems to oversee the consumption, distribution and sale of cannabis. The scope of their responsibility includes setting rules around where cannabis can be consumed, the legal age of consumption, how cannabis can be sold, where stores may be located, how prices are set, how stores must be operated and who is allowed to sell cannabis.
In addition, the provincial authorities are permitted to set added restrictions to the industry-wide standards set by the federal government, such as increasing the minimum legal age over what has been mandated by the federal government, lowering the personal possession limit set by the federal government, creating additional rules for personal cultivation, and restricting areas of consumption.
All regulation is currently carried out by governmental agencies, at various levels of government, as set out in 1.2 Regulatory Authorities.
Market participants face a number of challenges. The industry is heavily regulated both at the federal and provincial/territorial level. As a result, participants need to be well versed in the various pieces of legislation and regulations and also in how the regulatory regimes at the different governmental levels interact with each other.
The heavily regulated nature of the industry also means that the cost of participating in the industry is generally far higher than it would be in other industries, on account of things like additional licensing fees and taxes as well as the increased costs of having to ensure that businesses are compliant with the regulations (for example, implemented mandated physical security requirements).
Additionally, given that the industry is still relatively new (despite the fact that the Canadian market is now nearly three years old), industry participants face the challenge of dealing with regulators that are still finding their way themselves, as well as dealing with regulations that change and evolve in response to market conditions and political will as the industry continues to mature.
The regulatory regime at both the federal and provincial/territorial levels is highly developed and sophisticated. However, the industry is still evolving and the regulators are still finding their own way. As such, despite its level of sophistication, development of the regulatory regime is an ongoing process.
Companies ought to be aware of the extensive regulatory regime and its requirements. Failure to adhere to the regulatory regime can lead to significant fines, penalties and even potentially imprisonment for individuals and officers and directors of corporations. Failure to adhere to the regulatory regime can come in a variety of forms, including:
Additionally, despite the fact that cannabis is legal in Canada, carrying on a legal business in Canada can have repercussions on the business if it also has operations in other jurisdictions where cannabis is not legal. By way of current example, many Canadian banks will decline to accept cannabis businesses as clients for fear of running foul of federal American law, where the banks also have operations and where cannabis is still illegal at the federal level.
Health Canada and the various provincial and territorial regulatory authorities set out in 1.2 Regulatory Authorities share the collective responsibility of enforcement and compliance.
At a high level, Health Canada is principally tasked with ensuring that licensed parties and industry participants are complying with the industry-wide standards and corresponding legal obligations.
The Cannabis Actcontains a number of enforcement tools that may be utilised to uphold the Act's primary intents and purposes.
First and foremost, the Cannabis Actsets out the offences and the monetary penalties that are applicable to both individuals and organisations who act outside of the legal framework. The key offences include:
The penalties for the above-noted offences are set in proportion to the seriousness of the offence. The range of penalties begins with warnings and tickets for minor offences, and can intensify to criminal prosecution, imprisonment of up to 14 years, and monetary penalties of up to CAD500,000.
In addition, the Cannabis Actenables the regulatory authorities to impose administrative monetary penalties. These penalties are imposed through an administrative process rather than prosecution in a court of law and can range up to CAD1 million.
As provinces and territories have enacted further restrictions on the use and sale of cannabis within their jurisdiction, a regulated party may be subject to further offences and penalties.
For the purposes of this article, it is not possible to specify the details of each province and territory’s specific offences and penalties. However, on a general level, the penalty for these additional offences is a monetary fine.
It is imperative that every industry participant have a clear understanding of the regulatory restrictions that are in place within the jurisdiction or jurisdictions in which they participate.
As stated above, there are differences in law between the various provinces and territories. In some instances, the differences are minor. In other instances, the differences are quite significant.
Additionally, as stated in 1.7 Enforcement, carrying on business in the Canadian cannabis industry can have an impact on the business in other jurisdictions the business may operate where recreational-use cannabis is not legal.
As both medical and recreational cannabis are now legal in Canada, cannabis is the most accessible it has ever been.
Nevertheless, some commentators would argue that the current federal framework is too restrictive and is prohibitive to producers and consumers alike.
At the most basic level, the federal framework limits access through its stringent industry-wide rules and regulations. In addition, provinces and territories have set supplementary restrictions on the purchase, sale and consumption of cannabis. These restrictions have all had a direct impact on a producer’s ability to reach their target consumer, and a consumer’s ability to access the cannabis products that they want.
A prominent example is the price of cannabis products. The stringent licensing requirements, production and packaging regulations, the exclusivity of provincial wholesalers, and intensive capital investments that are required to enter the industry have driven up the price of the product over the past three years.
The reluctance of governments and their respective regulatory authorities to relinquish control in such a novel regulatory environment is arguably necessary to protect the integrity of the industry. However we have already begun to see modifications and relaxations to both federal and provincial regulatory frameworks. As the industry matures – in a similar way to the alcohol industry – it is likely that the Canadian cannabis industry will continue to see further relaxations of the rules and regulations.
In addition, the mandatory review provisions contained in the Cannabis Actmay also have an impact on future access to cannabis.
Pursuant to Subsection 151.1(1), three years following the enactment of the Act, there must be a review of the Act and its administration and operation. This review will consider the impact of the Act on public health and, in particular, the impact on the health and consumption habits of young people in respect of cannabis use, the impact on the indigenous communities of Canada, and the impact of personal cannabis plant cultivation.
Following the review, an official report is required to be published by the Minister of Health and must include both their findings and recommendations.
As the Cannabis Actis the legal impetus for the legalisation of cannabis in Canada, the upcoming review and subsequent report will be indicative of the future of legal cannabis in Canada.
All products containing ingredients derived from cannabis (or hemp) are heavily regulated. The federal Cannabis Act and the regulations enacted thereunder contain extensive provisions relating to how cannabinoids can be incorporated into food and other products.
In June 2019, the Canadian government initiated a public consultation to “seek feedback from Canadians, as well as the cannabis and health products industries, regarding the kinds of products they would be interested in purchasing, manufacturing, or selling, should [there be] a legal pathway to market for cannabis health products" (ie, products that contain low amounts of THC and are designed for health purposes). Given that Health Canada is the regulatory body primarily tasked with this consultation, the COVID-19 global pandemic has delayed the completion of the consultation. However, the expectation amongst industry participants is that, in the future, low-THC products will be regulated differently than other cannabis products and will be available for sale more widely.
Cannabis in Canada is legal for both recreational and medicinal purposes. The federal government announced that recreational use of cannabis would no longer be considered a criminal act as of 17 October 2018.
The Cannabis Actwas enacted by the federal government and legalised recreational cannabis across Canada. Subsequent to legalisation, the provincial and territorial governments have all passed supporting legislation and regulations.
The legalisation of recreational cannabis has a similar (albeit stricter) legal framework to that of alcohol, with rigorous laws and regulations controlling the product, distribution, sale, possession and consumption of cannabis products across Canada.