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Blog / Cannabusiness changes cause cross-border confusion


01 June 2018

In March 2018 the Canadian Senate passed the Cannabis Act in a landmark vote that will legalise recreational cannabis in Canada. The act is being reviewed by various Senate committees and is likely to come in to force in July 2018, bringing with it a flurry of topics for discussion. With the potential to have a major effect on businesses – whether from the standpoint of employment, international trade, new markets or changing regulation – our Lexology contributors are providing detailed coverage of the issues as they unfold. Davies Ward Phillips & Vineberg LLP’s popular article, ‘The Cannabis Frenzy, provides a clear overview of both the current situation in Canada and the potential impact cannabis legalisation will have – or, indeed, is having – on regulation, US equity markets and big pharma. 

Cannabis in the United States

The legality of cannabis in the United States is complex, with 29 states currently permitting medical use and nine granting recreational use at last count. The federal position has shifted under the Trump administration and seems to be far from stable. Under the Obama administration, then-deputy Attorney General James Cole issued a series of memoranda that saw federal enforcers take a ‘hands off’ approach in states that had legalised cannabis. While cannabis remained a Schedule I drug in the eyes of the federal level Controlled Substances Act, the ‘Cole Memorandum’ provided, as FisherBroyles LLP puts it, a “de facto federal safe harbour” for the US marijuana industry.

In January 2018, Trump-appointed Attorney General Jeff Sessions rescinded the Cole Memoranda, reflecting “Congress's determination that marijuana is a dangerous drug and that marijuana activity is a serious crime” and causing great uncertainty for the multitude of businesses operating legitimately in the cannabis industry. To complicate matters, in April 2018 the Trump administration confirmed it will not promote federal interference with state cannabis-related law – as covered in Hopkins & Carley’s article ‘President Trump’s U-Turn toward Cannabis: His Promise of Noninterference with Colorado’s Legalized Cannabis Programs’. In the face of uncertainty, Lane Powell PC have presented ‘A (Truly) Modest Proposal for Compromise on Cannabis.  

A lucrative opportunity?

The legalisation of cannabis is a high stakes game, with the potential to open a huge new market. PwC Canada’s recent article ‘The cannabis landscape’ examines the state of the market, its drivers and the latest deals affecting the state of play.

Gowlings has also commented on the emerging market, with ‘Canadian cannabis companies gaining traction in capital markets south of the border: First cannabis listing on NYSE commenced today’ covering Canopy Growth Corporation’s listing (with market cap of C$7.74 billion), and other significant listings and transactions.

Confusion for employers

The legalisation of cannabis affects employers in many ways. With permitted medical use comes a wealth of uncertainty for employers trying to reconcile a ‘zero tolerance’ drugs policy with a requirement to comply with the discrimination legislation and provide reasonable accommodations to disabled employees. With legalised recreational use, employers ensure any ‘in work’ policies or requirements balance the employer’s rights with the employees’ rights to recreational use outside of work.

This issue has come to the fore in Massachusetts, with the high-profile Massachusetts Supreme Judicial Court decision covered in Holland & Knight LLP’s popular article ‘Medical Marijuana Use May Be Reasonable Accommodation Under Massachusetts Law’. Our contributors are also providing updates across many other jurisdictions:

International tensions

On top of any domestic complications, Canada’s Cannabis Act threatens to have wide-ranging implications for Canadian businesses and individuals who travel to or do business with the United States. Blaney McMurtry LLP’s ‘How the Legalization of Marijuana Will Affect Your Ability to Travel to the United States’ provides clear answers to pressing cannabis-related immigration questions such as “Will I be barred [from the USA] for using/possessing marijuana in Canada after it becomes legal?” and “I am employed in the marijuana industry in Canada. Can I be denied admission to the United States because of my occupation?”, earning it the top spot as the most popular Canadian article in front of our in-house subscribers across all work areas.  The complex issue has also been covered in:

To help to provide clarity for Canadian businesses with US cannabis-related activities, the Canadian Securities Administrators (CSA) has issued a notice clarifying their requirements and recommendations for disclosure documents relating to the businesses’ involvement in the US cannabis industry. Miller Thomson LLP conclude in ‘CSA Provides Clarification to Issuers with U.S. Marijuana-Related Activities:

“The Revised Notice is excellent news for U.S. marijuana businesses (and their investors) as the CSA will not prohibit financings in Canada by those operating in the U.S. marijuana industry as long as the prescribed disclosure requirements are adhered to.”

What next?

While the legal status of cannabis in the US remains uncertain, our subscribers will be watching closely as Canada’s Cannabis Act comes into force. The legal commentary around cannabis is set to continue and to give our contributors plenty of opportunities to add to the discussion. Reports have even surfaced today that American football star Mike James has submitted a therapeutic use exemption (TUE) for cannabis, requesting permission from the NFL for medicinal use and thrusting cannabis into the mainstream media once again. Legal cannabis’s impact on employment law is becoming clearer, and it is surely just a matter of time until its effect on mainstream healthcare, tax, commercial and trade law will be put under the microscope.