Andrea Hill is a Toronto-based corporate commercial lawyer with a specialty practice in marijuana regulation and finance. She is an associate at Wildeboer Dellelce LLP
With his decision in Allard et al v. Her Majesty the Queen in Right of Canada, Justice Michael Phelan of the Federal Court addressed a challenge which has been hanging over the Marihuana for Medical Purposes Regulations ( MMPR) virtually since their enactment.
On its face, the Allard decision looks dramatic. On the basis that they unjustifiably infringe liberty and security interests pursuant to section 7 of the Charter of Rights and Freedoms, the entire MMPR were declared invalid. The federal Liberal government was given six months to enact a Charter-compliant "new or parallel medical marijuana regime."
For the many Canadians for whom marijuana is a medicine, Allard's theme of increased access is reassuring and validating. However, for stakeholders of the MMPR, this decision has the potential to undermine the legislative landscape on which their business and investment decisions have been made.
Federal Health Minister Jane Philpott has affirmed the government's commitment to promulgating "fair access" to marijuana under Charter-compliant regulations. It is too early to say what that solution may look like.
My work has often brought me into contact with licensed producers and applicants under the MMPR as they grow and transform their businesses. It is important to recognize that in their unprecedented creation of a brand new industrial space, the MMPR have given rise to a phenomenon of business activity. Thousands of companies have been organized. Hundreds of construction projects have been initiated. Millions of dollars in financings have been raised, often in conjunction with independent investment banks and retail investors.
In essence, far from creating an exclusive oligopoly of privileged corporate players, the MMPR have arguably given rise to one of the most remarkable grassroots entrepreneurial movements our country has recently seen.
It may be reflexive to think of the Allard decision as damaging to licensed producers because it crashes up against the valuable exclusive production rights offered by the MMPR. However, the ruling can be viewed as offering a step forward for both patients and producers , and that the industry is ready for it.
The capital markets provide the most visible evidence of this. In many cases, the market capitalization attributed to licensed producers and even applicants – tens, sometimes hundreds of millions of dollars – is vastly incongruous with the available purchasing power of the 60,000 or so authorized medical users of marijuana in Canada. This disconnect between market size and capitalization only makes sense when an exponentially larger purchasing power – such as a public market for recreational marijuana – is assumed to be imminent, and licensed producers are thought to be the frontrunners to supply it. The market has anticipated from day one that medical patients were not the ultimate destination.
In making the case for licensed producers , we can also look to how smoothly the MMPR industry is now running due to the tremendous amount of regulatory work invested by Health Canada. In addition to selecting, governing and auditing licensed growers , Health Canada has recently issued additional MMPR licences and increased authorized production volumes in respect of existing licences. The industry has found its rhythm. It makes no sense to let that go to waste. On the contrary, the Allard ruling may simply be the point at which all of that regulatory momentum can start to be redirected towards the non-medical consumer.
The Allard decision represents a chance for legal recalibration. Sound regulation can protect important rights as well as offer a foundation for business success. Although the ruling does not deal with any issues surrounding non-medical access to marijuana, it can help us to think about how the future of marijuana regulation in Canada might look. The federal government, in crafting a new marijuana regime, will have the extraordinary opportunity to improve the way it serves the interests of both patients and licensed producers . And both groups can benefit.