Canada: Why Short-Sightedness May Cost Marijuana Dispensaries A Fortune

Last Updated: January 9 2017
Article by Matt Maurer

The Federal Government has indicated that it intends to table recreational marijuana legislation by the spring of 2017. As we all know, politicians never break promises or deadlines. Even if the legislation is tabled in the spring it is widely anticipated that the changes will not be implemented overnight, with some predicting that the Canadian recreational marijuana market may not be fully open and legal until as late as 2019.

The recent release of the Task Force on Cannabis Legalization and Regulation's report has created significant buzz about many aspects of what Canada's new legislation regarding recreational marijuana may look like. The Task Force has made recommendations regarding, among other things, production, distribution, and limitations as to where cannabis may be sold. What they have not done is address how the government ought to handle previous convictions of possession, trafficking and production of marijuana that occur prior to the new legislation coming into force.

Currently, the only legal access to marijuana is for medical purposes in accordance with an exception found under the Controlled Drugs and Substances Act.  The only legal way to acquire medical marijuana is via mail order.

Despite this, cities and towns across Canada are seeing an increasing number of dispensaries open up shop. Even though it appears that the majority of these dispensaries will not sell without a medical prescription, and although many follow strict security protocols, in reality these dispensaries are operating illegally with many hoping to just "skirt by" until recreational marijuana is legalized. As indicated above, this might not be until 2019. Two years seems like an awfully long time to operate an illegal business while hoping not to be subject to criminal charges.

Current dispensary owners and operators looking to the future without considering the present face a significant risk of being criminally charged and, as a result, being potentially shut out of a multi-billion dollar recreational marijuana market before it has even begun.

While we cannot know with certainty what the new legislation will look like until it is released, the best bet for insights is to look to the existing Access to Cannabis for Medical Purposes Regulations.  We believe that the federal government is likely to borrow heavily from the Regulations, which came into force in August, 2016 and address many of the shortcomings of previous medicinal marijuana regulations.

Under the Regulations, licensed producers may possess, produce, sell, provide, ship, deliver, transport and destroy marijuana and cannabis oil. In order to apply for a producer's license eligible persons (an adult ordinarily residing in Canada or a corporation with a head office in Canada) must submit lengthy applications including, but not limited to, proposed activities, sites, security measures and record-keeping methods.

Under the Regulations,  the Minister must refuse to issue a producer's license if the applicant contravened a provision of the Controlled Drugs and Substances Act,  its regulations, or the Food and Drugs Act within 10 years prior to the date of the application.

Running dispensaries illegally certainly runs afoul of the provisions of the Controlled Drugs and Substances Act.  Dispensary operators across Canada have been arrested during police raids for offences such as marijuana possession, trafficking and possession of proceeds of property obtained by crime. Police in major cities have stated they have no intention on stopping, as raids continue even with legalization on the horizon.

If the new legalized recreational marijuana legislation has similar provisions to the existing Regulations  with respect to grounds for refusal of a license, dispensary owners could face serious ramifications for non-compliance with the current law. Previous convictions under the Controlled Drugs and Substances Act could preclude current dispensary owners from obtaining licenses under the legal marijuana regime.

Current dispensary owners and operators who want a stake in the legal marijuana market would be well served to seek legal advice and evaluate preventative options before  they have been raided and charged, by which time it may be too late. Diligent planning and corporate legal structuring could go a long way to ensuring that current dispensary owners do not get shut out of the multi-billion dollar legal marijuana industry once it finally arrives.

Originally published on Slaw by litigator Matt Maurer and Student-at-Law Whitney Abrams.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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