Will It Be A Brexit Boom Or Bust For British Cannabis?

Brexit and British Cannabis

Will It Be A Brexit Boom Or Bust For British Cannabis?

A Boris Johnson Brexit looks set to free the U.K. from the regulatory orbit of the European Union (E.U.) and usher in an exciting new era for cannabis.

The freedom to overturn the restrictive E.U classification of CBD as a ‘Novel Food’ is the key potential Brexit win for many. This, and the removal of punitive restrictions on cultivation, could prompt a U.K. cannabis investment boom.

However, some U.K.-based cannabis brands with an international focus fear Brexit could lead to more ‘Red Tape’ – and increased costs.

Novel Food Deters Investment

The Novel Food issue has shrouded the European CBD industry in a cloying cloak of uncertainty for the last year; Brexit could provide an opportunity for Britain to escape its shadow.

Leading U.K. cannabis lawyer Robert Jappie, who will be joining international Law Firm Ince this month, has first-hand experience of the stasis it has caused.

He said: “We really need a resolution to the Novel Food issue this year. I am aware of many significant investors who are holding back from the sector because of it.

“They say they want to get involved and then they come back and say ‘we have heard about novel food, and we’ll just wait’.

“The bigger companies, the likes of Coca Cola and Nestlé, are happy to wait until the regulations are clear before making a move – it’s an issue that needs resolved.”

‘Not A Good Look’

Mr Jappie believes the U.K will choose to diverge from the existing Novel Food guidelines saying: “The optic of a U.K. regulatory body (Food Standards Agency) saying they are going to enforce non-binding E.U. regulation, in the current political climate, wouldn’t be a good look.”

He also highlights how a U.K. divergence from the E.U. rules will help deliver the sort of Brexit its supporters crave.

“I think Novel Food is a very easy win for the U.K. government. If the point of Brexit is actually to diverge from E.U. rules they could take the position of ignoring it, and show their backing for the U.K. CBD industry.

“The clear benefit of the leaving the E.U. for Brexit supporters, is that we are able to diverge from E.U. rules.”

Brexit Not BRINO

Under the previous Prime Minister Theresa May the U.K. set out on a BRINO (Brexit in Name Only) path which posited close regulatory alignment. Mr Johnson, on the other hand, is said to be looking for a basic free trade deal with the E.U.

In such deals the generally accepted view is that if regulatory alignment is not achieved, ‘mutual recognition’ of each others standards is a suitable substitute.

However Brussels’ negotiators appear to baulk at this.
While neighbours U.S. and Canada trade on mutual recognition terms negotiators in Brussels see the proximity of Britain as ‘too great a competitive risk’.

Some Will Choose To Align With E.U.

Mr Jappie elaborated: “It’s a complex issue. I personally think the E.U. will take a very tough stance and not allow the U.K. to abide by whatever rules it chooses.

“Will the E.U. allow for mutual recognition? Well, here, it looks like it could be trade-off for access to continental markets. The problem for the U.K. is that a lack of mutual recognition will make it more difficult for CBD companies to sell product to the E.U.”

If a mutual recognition agreement is not forthcoming then U.K.-based international cannabis brands, trading in Europe, may need to incur additional costs to align with Novel Food.

Food Standards Agency

If Novel Food is dropped there will need to be a change of mindset at the FSA. It has maintained a consistent stance in the last year, and re-stated it earlier this month.

In a statement it said: “CBD extracts are considered novel foods under food law and we expect companies to comply with the novel foods process, which includes submitting safety information about their products.

“The FSA is considering the best way to ensure CBD food-related products currently on the market move towards compliance.”

In relation to Brexit a spokesperson said the regulatory landscape for CBD is ‘subject to negotiations on the E.U. and U.K.’s future relationship, which will take place throughout this year’.

U.K. Trade Associations

Peter Reynolds has been campaigning for cannabis liberalisation since the 1970s. He is co-founder and President of cannabis law reform group CLEAR and industry trade group and self-regulatory body CannaPro.

He is urging all U.K. cannabis businesses to lobby their MPs in a bid to sink the controversial Novel Food regulations before they cause further damage.

“Our new trading relationship means we no longer have to follow E.U. rules and the Food Standard Agency can no longer hide behind the European Union. They will now have to explain for themselves and justify for themselves why they are following the European rules on Novel Food,” he said.

Fellow U.K. industry group the Cannabis Trades Association (CTA) has also ratcheted up the pressure on the FSA, as the nation leaves the E.U. In a recent press release Chairman Mike Harlington said it is launching a ‘systematic campaign of political and media engagement to keep the pressure on the FSA not to attempt to enforce any move against the CBD industry, based on the Novel Foods issue’.

He went on to say any such enforcement could ‘hit millions of consumers who regularly use CBD products’

Centre For Medicinal Cannabis

Steve Moore, Strategic Counsel & Director at the Centre for Medicinal Cannabis, highlighted potential customs hold-ups at the border as a downside to Brexit, saying: “There are no harmonised rules relating to medicinal cannabis and the import process is already challenging.

“We would hope that Brexit does not create any practical disruption for couriers to further add to the complication, but there is a risk of delay in medication clearing customs due to the high volumes of other imports and any increased administration.

“The EU does not typically charge tariffs for medicinal products and we hope that this remains the case and that we remain part of the European Medicine Agency in the short term to avoid legislation creating complications.

“The biggest risk that we foresee currently is that politicians and civil servants have been prioritising Brexit and last year’s election, meaning that there is less focus on the minor regulatory changes required to enable medicinal cannabis to operate predictably for patients in the UK.”

U.K. Growing Rules ‘Perverse’

Meanwhile, domestic cannabis cultivators are also hoping that Brexit will lead to the removal of growing restrictions. As things stand U.K. farmers are bound by E.U. rules which limit seed types to those with less than 0.2% THC.

There are Europe-wide moves to increase this to 0.3% and there is no reason why the U.K. could not push for the same 1% level as Switzerland – a fellow Non-E.U. country.

Lobbying on this will accompany efforts to remove rules enforcing the destruction of both flowers and leaves – the most valuable parts of the plant.

Removing such restrictions would support home-grown medical cannabis and CBD cultivators and spur the growth of the nation’s hamstrung industrial hemp industry.

Mr Jappie said: “If we had designated government department in say DEFRA (Department for Environment, Food & Rural Affairs) dealing with cultivation, we could set out own standards and become a market leader.”

This view is backed by one of Boris Johnson’s Policy advisers Blair Gibbs, in an interview last year when he was previously with the Centre for Medicinal Cannabis.

During the interview he described the U.K.’s licensing position as ‘perverse’ and ‘unsustainable’. Mr Gibbs also said the Novel Food regime is ‘not workable for the U.K. CBD market’.

A Final Thought: Brexit and Cannabis Decriminalisation in U.K?

Mr Gibbs joined the No. 10 team in the run up to last December’s General Election, at the same time as fellow cannabis supporter Danny Kruger. Mr Kruger is now the Prime Minister’s Political Secretary, and he has also called for an end to cannabis prohibition.

With these two whispering in the P.M.’s ear and a growing cross-party alliance of MP’s calling for the decriminalisation of cannabis the mood music in the U.K. has shifted significantly in the last 18 months.

CBD and medical cannabis are now mainstream and many commentators believe we could see major changes over the course of this five-year Parliament.

*Britain’s exist from the EU will be complete at 11pm on January 31, 2020. It is currently in a transitional period during which existing arrangements apply, and future trading arrangements will be agreed. If agreement cannot be reached then the U.K. and the E.U. will trade on WTO terms.

Contributed by Peter McCusker

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