Canada: Health Canada Revamps Cannabis Licensing Process

Last Updated: May 21 2019
Article by Eric Foster, James M. Wishart, Scott Rozansky and Shea Coulson

On May 8, 2019, Health Canada, the body responsible for administering federal cannabis licences, announced a major change in the application process for granting licences to cultivate or process cannabis, or to sell cannabis for medical purposes. The changes took effect immediately and are likely to have significant impact on parties who are already in the application queue and anyone contemplating an application for a federal cannabis licence.

The new application process

Applicants for licences to cultivate cannabis, process cannabis, or sell cannabis for medical purposes are now required to have a fully-built site that meets all of the requirements of the Cannabis Regulations at the time they submit their application, in addition to fulfilling the other application criteria. Aside from this change, the other application requirements have remained the same.   

Under the previous regime, applicants were able to obtain a Confirmation of Readiness (COR) letter from Health Canada with minimal capital investment and prior to commencing the building of the proposed site. A COR officially notifies the applicant that the application has been reviewed and all criteria have been met "on paper", including the security clearance of all applicable personnel. Many applicants used the receipt of a COR as an indication to investors that they were a candidate for investment and as a trigger to commence building their licensed site.

Now, applicants must submit—along with their paper application—an "evidence package" demonstrating that their proposed facility (for cultivation, processing and/or sale) meets the licensing criteria. Put otherwise, applicants must front-load their largest capital investment before even submitting their application, and face the risk that their application might not ultimately be approved by Health Canada.  

In an effort to mitigate this risk and provide more guidance on facility construction, Health Canada has amended the Cannabis Licensing Application Guide, and released a Physical Security Measures Guide for Cannabis and a Good Production Practices Guide for Cannabis to include some additional detail and advice on how to meet mandatory facility criteria. 

The rationale

According to Health Canada, over the past three years, more than 70 percent of applicants who successfully navigated the paper-based review (leading to a COR) have failed to provide evidence of a fully-compliant cannabis facility. As such, Health Canada has advised that "a significant amount of resources are being used to review applications from entities that are not ready to begin operations, contributing to wait times for more mature applications and an inefficient allocation of resources."

As more applicants seek to enter the legal market, Health Canada has instituted these changes to help shorten the time it takes for applicants to gain access to the market, thereby fostering the efficient operation of Canada's legal cannabis market.

What about existing applicants?

There are currently more than 700 applicants in the queue for cultivation, processing or medical sale licences that may be impacted by the changes to the licensing process. Health Canada has stated that it will complete a "high level review" of the applications currently in the queue. The applications that pass this review will be sent a letter indicating there are no concerns with what has been proposed in the application. Health Canada will review the application in detail once the applicant has completed the construction of a facility compliant with the Cannabis Regulations, and submitted its evidence package. Health Canada has confirmed that compliant applications will be reviewed in priority order, based on the original application date.   

Shortly following its announcement, Health Canada has begun to send update letters to applicants who are deemed by Health Canada to have undergone the undefined "high level review. These  letters state that "Based on the information assessed, Health Canada has no critical concerns with the application at this time." It remains to be seen whether these letters provide the recipients or their investors with sufficient comfort to proceed with the buildout of their facilities.

Dentons Canada's insight 

Health Canada has suggested that its revamped process is consistent with the licensing approach in other regulated sectors, including pharmaceuticals, and will hopefully bring increased efficiency and reduced wait times to the licensing process. However, it remains unknown how these changes will ultimately impact the overall timing for the issuance of licenses and, perhaps most importantly, the types of applicant that will ultimately be successful in obtaining such licenses. 

It has been well documented that many of the 700-plus applicants currently in the queue are already finding it challenging to obtain the necessary capital to complete their proposed site. Moreover, the revamped process will likely act as a barrier to entry for certain new applicants who could previously commence the application process (and utilize Health Canada resources) without having any funding in place. As such, the changes, on their face, seem to benefit those applicants who are already well-capitalized, which may include existing Licensed Producers. In this regard, existing Licensed Producers might also benefit from their prior experience of how to build a compliant site in a cost-effective manner, whereas new market participants will be relying exclusively on Health Canada publications and guidance, or licensing consultants to complete their sites.

On this latter point, we note that in its communications in respect of this modified approach, Health Canada has publicly committed to support small entrepreneurs and First Nations to take advantage of opportunities in the cannabis industry. It remains to be seen what effect the current application process changes will have on Health Canada's ability to meet that commitment.

Indeed, there is little doubt that many hopeful market entrants, with or without applications in process, are currently re-evaluating their options. It is reasonable to expect that such applicants may have to scale down their initial plans, and complete an initial phase that is smaller and has different economics than what they had originally planned. In this regard, half-serious proposals for 100-square-foot "phase 1" cultivation facilities are already appearing in industry forums. To the extent this strategy takes off in any form, Health Canada may face a new backlog in the form of applications for licence amendments some time in the future.

The authors gratefully acknowledge the contributions of Stuart Ruffolo.

About Dentons

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com

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. Specific Questions relating to this article should be addressed directly to the author.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions