Speaking to Elliott Rolfe, we learn where UK businesses stand with cannabis-based products and the precautions they should take. Is it worth starting your own CBD business? Read on to find out.
How is the UK’s interest in legalising cannabis - especially medicinal cannabis - changed in the past few years?
In terms of the British people's interest, a lot has changed. We have certainly seen some emotive cases being reported, which has put pressure on legislators to address the Government’s historic lack of interest in legalising medicinal cannabis; has it changed enough? Not so much, unfortunately. Whereas a couple of high-profile cases resulted in a change in UK law, allowing medicinal cannabis to be prescribed legally, prescriptions will only be issued under extremely limited circumstances.
The change in the law was made in November 2018 after a mother - whose son, Billy Caldwell, has a rare and severe form of epilepsy, publicly broke the law for her son by bringing cannabis oil into the UK. The fact that the list of both eligible patients and specialist prescribing doctors is so restricted, the general need is not being met at all.
More recently, a number of MPs have been looking into changing legalisation in the UK and have been travelling abroad to cannabis friendly jurisdictions and devising reports to assess any potential changes; they are still thinking, however, that it will be at least five years until we can get any wider legislation implemented.
In early 2020, we saw another step forward after the government lifted import restrictions on cannabis-based medicines. Licenced wholesalers can now hold stocks of cannabis-based medicines in the UK.
There are other laws that businesses must abide by even though they are not specific to cannabis laws and regulations in the country at the moment.
When it comes to UK based laws, what can businesses do and not do when it comes to cannabis derivatives?
The most common cannabis derivatives we see are THC and CBD. THC is the component of the cannabis plant that has a psychoactive effect - or as people would commonly say, ‘it gets you high’. At the moment, this is not legal to be sold by businesses to the general public. There is an exemption which allows trace amounts of THC to be present in products, but you can't have regular THC based products on the shelves at the moment. Thus, businesses using products with cannabis derivatives generally aren’t using THC unless they are actually creating medicines.
What we do see a lot of is cannabidiol or “CBD”, which also has a lot of benefits, but doesn’t have a psychoactive effect. CBD is currently not controlled in the UK and there is barely any regulation that specifically applies to the use of CBD at present, but we do have other-sector specific regulations that are applicable and give guidance. For example, the UK and EU Food Standards Agencies now need to assess food products containing CBD before they are allowed to be sold, and as such, the UK Food Standards Agency has given businesses in the UK until 31 March 2021 to apply for authorisation, prior to marketing any cannabinoid-containing food products. After this date, each distinct cannabinoid-based product will need to go through its own rigorous examination before it shall be lawful to sell. There are also other rules which restrict companies in relation to all products, such as packaging. For argument's sake, businesses cannot make any medicinal claims when marketing general products. So, there are other laws that businesses must abide by even though they are not specific to cannabis laws and regulations in the country at the moment.
Another issue is the Proceeds of Crime Act. UK companies who have invested in cannabis businesses abroad may face problems if they have funds that are generated from activities abroad which would be illegal if that same activity occurred in the UK
What challenges may businesses face in this industry?
One of the biggest difficulties businesses in this area face at the moment is getting bank accounts and payment services to support them. Very few providers are willing to take on the reputational or legal risk, which arguably, is understandable. If a business sways into the territory of accidentally using too much THC for example, bank providers are essentially linked to illegal drug dealing, which obviously concerns such providers. Either way, we have a number of providers that we work with that are prepared to provide those types of banking accounts and payment facilities to clients, as most common business bank account providers will close your accounts if they find any connection to the cannabis industry.
Until recently in the UK there had not been any formal guidance released confirming to what extent (if at all), the authorities intended to enforce certain EU guidance, in the UK. This created a whole different area of difficulty, as many local and border authorities did not (and still do not) understand the law, nor the Government’s position in terms of how the EU guidance was to be implemented in the UK).In addition, many businesses and authorities alike do not appear to understand the applicable exemptions. So we have seen trading standards and other enforcement bodies ceasing shipments, raiding warehouses and taking legal products off the shelves which, obviously, if you’re a business and have customers relying on you, is not ideal.
Another issue is the Proceeds of Crime Act. UK companies who have invested in cannabis businesses abroad may face problems if they have funds that are generated from activities abroad which would be illegal if that same activity occurred in the UK. Any income made this way can be treated as criminal proceeds. This is an issue for those investing in the cannabis industry, yet there is a good argument to say that the Proceeds of Crime Act shouldn't apply in this country in relation to cannabis investment, as we haven’t got any legal certainty on most of our cannabis laws yet ourselves. On the plus side, we haven't seen any arrests in the UK for any overseas activities under the Proceeds of Crime Act.
Another challenge is advertising and marketing, as aforementioned, it is very tricky because you can easily make a medicinal claim accidentally on your packaging when you're not allowed to make them. It becomes tricky, as you can suggest your product might help to reduce certain symptoms, but you have to be very clear it is not acting in replacement of medicine or used to treat any specific illness among other things.
I think we are going to get much better guidance from domestic regulators soon, which will bring certainty to the industry
Product composition is also an issue; unlike other industries, if your product isn't as pure as one may expect it to be, i.e., if it has traces of THC in it - it is not just a compliance or quality issue, but also a criminal drugs offence, which is a much more serious offence than what other companies selling, baked goods, for example, may face. It is probably one of the riskiest businesses I have seen to date.
From what we have discussed so far, what changes do you envision occurring?
I think we are going to get much better guidance from domestic regulators soon, which will bring certainty to the industry, and hopefully, soon we will have bespoke cannabis regulation. We are gradually seeing more payment providers opening up to the idea of providing these facilities and the taboo associated with cannabis is slowly disappearing, which will help a lot. This will slowly, but surely, see to better quality cannabinoid wellness products, and ultimately more prescriptions for medicinal cannabis in this country, as people realise it is not this unsafe, scary drug, but a legitimate, ground-breaking medicine.
Elliott Rolfe
Associate Solicitor, London
elliott.rolfe@mackrell.com
+44 (0) 20 7240 0521
+44 (0) 2039726790
About Elliott Rolfe:
Elliott joined the firm in 2019 as part of the fast-growing Cannabis Law team. Having previously worked in a regulatory role as a solicitor for major investment banking institution, Credit Suisse, Elliott has a strong background advising on a range of complex legal issues.
Having acted for various banks, Elliott is experienced in liaising with multi-national civil and criminal regulators in a variety of contexts and advising on a broad range of EU and international regulations.
Before joining the world of banking, Elliott worked as a specialist litigation paralegal at a ‘Magic Circle’ law firm.
Elliott is keenly interested in drug policy reform and regulation and is a supporting community member of the organisation DrugScience – the leading independent scientific body on drugs in the UK.
Elliott holds a Certificate in Medical Cannabis from the University of Colorado, completed an undergraduate degree in Philosophy and Psychology at the University of Kent, and holds a Diploma in Law and a Postgraduate Diploma in Legal Practice.
He is part of the firm’s stated intent to be at the forefront of legal developments in medicinal cannabis and other psychoactive substances, so that he can provide clients with advice on these emerging areas of law.
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