We are excited to present the following post by INCBA Advisory Board Member Kai-Friedrich Niermann, originally posted on Krautinvest.
2020 was a moving and extraordinarily hopeful year for the CBD industry, with events that will point far into the future of the hemp sector.
CBD – Finally Legal!
The European Industrial Hemp Association (EIHA) decided in June 2020 at its general meeting to launch the joint application for four CBD formulations, investing up to €3.5 million in toxicological studies. These studies should prove the safety of CBD in food and allow for higher THC guideline levels than those currently in place. The collaborative project was about to get underway when, in July, the Directorate General of Health (DG Sante) informed several applicants seeking to submit a novel food application that there was a preliminary belief that hemp extracts should be classified as narcotics and not as food. The background to the decision is Article 2 of Regulation (EU) No. 178/2002, which refers to the 1961 Single Convention on Narcotic Drugs, Annex 1 of which classifies extracts of cannabis as narcotics. An application under the NF Regulation was therefore not possible.
Next, the European Court of Justice ruled on 19.11.2020 that hemp extracts, and also from the flowering and fruiting parts of the plant, and not only from the leaves and seeds, do not fall within the scope of the Single Convention and are subject to the principle of free movement of goods.
The Court recognizes that a literal interpretation of the provisions of the Single Convention could lead to the conclusion that CBD, to the extent that it is extracted from a plant of the genus Cannabis and that plant is used in its entirety – including its inflorescence and fruit – is a cannabis extract within the meaning of Annex I to the Convention. Consequently, such an extract could also constitute a „drug“ within the meaning of Article 1(1)(j) of the Convention. However, the Court emphasized that the objective of the Single Convention, namely the protection of the health and welfare of mankind, must be taken into account when interpreting its provisions. The Court concluded that, according to the current state of scientific knowledge, CBD does not contain a psychoactive component and that it would therefore be contrary to the purpose and general spirit of the Single Convention to include hemp extracts as cannabis extracts under the definition of „drugs“ within the meaning of that Convention.
The EU Commission (DG Sante) already reacted to this decision and informed the applicants of Novel Food applications by letter dated 02.12.2020 that the review of the validity of the applications will be resumed. This includes the joint application of the EIHA.
The Court’s ruling and the EU Commission’s decision thus confirm that the use of hemp-derived CBD products in cosmetic and food products may not be prohibited on the basis that the use of „cannabis extracts“ in such products is prohibited by reference(s) in the relevant provisions of the Single Convention.
At EU level, the following now applies: industrial hemp extracts in consumer products are in principle marketable, provided that all other regulations applicable to the respective sector are complied with (Novel Food Regulation, EU Cosmetics Regulation, etc.).
If a member state wishes to continue to classify hemp extracts as narcotics on the basis of its applicable national narcotics law (e.g. Slovakia, France, courts in Germany), the affected economic circles can now directly refer to the decision of the European Court of Justice of November 19, 2020 as binding precedent as well as to the decision of the EU Commission. An EU-wide harmonization and legalization of the term “industrial hemp“ would of course be desirable and should be pursued in the long term, not least to ensure the European competitiveness of the hemp sector globally.
However, the development of a single CBD market in Europe is finally foreseeable with these two developments.
Considering that the trade with CBD flowers, which are very popular in Germany, is legal in Luxembourg, Belgium, and Austria, the principles established by the ECJ should also apply to these hemp flowers. These countries have made the products subject to tobacco law as an herbal smoking product, with the consequence of corresponding taxation. Whether this approach could also be a viable business model for German importers of CBD flowers remains to be seen. Ultimately, however, nothing should stand in the way of importing these products in accordance with the most recent case law of the ECJ.
In any case, affected parties in pending criminal proceedings, which were initiated in numerous cases against traders of CBD flowers and even hemp foodstuffs in 2020, should refer to this decision as of now to build up their defense.
The topic of hemp and CBD was also discussed several times in the Bundestag last year. The opposition has introduced several small questions and motions on the topic. Even the CDU has recognized that the CBD market needs a clearer legal framework than is currently offered, as their MP Pilsinger surprisingly admitted in the debate on the Green Party’s Cannabis Control Act.
Medical Cannabis – Still Has Potential!
The market for medical cannabis continues to develop positively, although still not with the exponential growth predicted by some. As of June 2020, nearly 5000 metric tons of cannabis flowers alone have been imported for the medical care of patients in Germany. The gross sales of health insurance companies of cannabinoid-containing finished medicinal products from January to September 2020 totaled € 111,578,967. Both figures once again demonstrate a significant increase compared to the previous year. Nevertheless, intensive work must continue to educate patients and the medical profession to further establish the possibility of cannabis as an alternative form of therapy.
In addition to the Netherlands and Canada, many new suppliers have entered the German market, some of them with very innovative products because they are not irradiated. Only through clear diversification of the product range will the import companies for medical cannabis, which now number well over 50 in the market, have a long-term prospect of survival. The expected market shakeout has not yet occurred.
From these figures, however, it is again clear that the production volumes set by the Cannabis Agency for the companies licensed to cultivate in Germany are far too low to fully supply patients in Germany.
The federal government itself admits that i
mports are still necessary and also legally possible.
2021 will also be a crucial year for the medical cannabis industry in Germany, with potentially far-reaching changes. Federal elections will be held in September, and it is may likely that a new federal government will be sworn in at the end of the year. The FDP and its health policy spokesman Dr. Schinnenburg, for example, are already explicitly calling for the opening of the production volumes set by the Cannabis Agency in order to establish a new industrial location for medical cannabis in Germany, including the possibility of exporting medical cannabis. As an export nation, Germany would also have to become active here, attract further investment and create new jobs.
If, with a new federal government, new heads also move into the higher federal authorities (BfArM, BVL, BfR, BMG, etc.), it is quite possible that the tentative reform of 2017 will be continued and again significantly deepened, with a perspective for improving patient care as well as the development of a modern and sustainable industry.
Recreational – Soon Legal?
But the federal election in September 2021 will be able to make another crucial difference.
The debate about the legalization of cannabis has clearly picked up speed again, after having to organize life with the pandemic for the time being in the spring. The prediction that after the election a new government will come into office that will introduce a new cannabis policy is still valid. It is hard to imagine that if the strong Greens join the government, whatever form it will take, they will this time again sacrifice their cannabis control law under the compulsion of reaching an agreement with the other coalition members. The Cannabis Control Act provides for complete decriminalization and a regulated market based on a free market model with many detailed regulations on social responsibility, prevention and youth protection.
On the one hand, this would gamble away the political credibility of the Greens, on the other hand, there are also no real arguments from the CDU against legalization anymore, as the last debate in the Bundestag and the haplessly acting drug commissioner shows. [Link: Plenary Minutes of October 29, 2020; Agenda Item 12 et seq.]
Arguments are twisted, distorted, or even deliberately misrepresented by the CDU. The arguments put forward by the CDU against legalization have been scientifically refuted for years, and some of them are no longer supported by their own ranks, the police and the judiciary. For example, LEAP Germany, an organization of employees in the judiciary against prohibition, has criticized the debate culture of the CDU parliamentary group in an open letter and in particular refuted the false figures and conclusions from Canada. There, legalization continues to show positive effects, in particular the black market could be pushed back further in 2020.
The arguments in favor of legalization are obvious: more funds for prevention and youth protection through regulated tax revenues from legal businesses in cultivation, wholesale and retail, tens of thousands of new jobs and a significant relief for the judiciary through 180,000 fewer criminal proceedings. A simple measure that will immediately have a positive social impact, and one that is indispensable, not least to combat the consequences of the pandemic.
There is also hope for decriminalization in the specific application for a judicial review submitted by Bernau District Court Judge Andreas Müller to the German Supreme Court last year. Although the chances of success of this application can be judged poorly, it is an important signal that also the jurisdiction must deal again with the reform backlog in drug policy and the failed war on drugs. Not least, many global changes in cannabis policy were only made possible by court rulings.
Internationally, too, the pressure on Germany will increase. Mexico, Luxembourg, Israel, other U.S. states, and possibly also a federal reform at the U.S. level will become important milestones in 2021. Closing one’s mind to these developments and insisting on old positions from the wrong decisions of the last century will have less and less to do with „good governance“ and will be perceived as such by voters and those affected.
2021 will be a decisive and exciting year in which the decades of efforts by activist groups, first and foremost the German Hemp Association, can finally pay off. Until then, we all still have a lot of convincing to do, because it depends on each individual. The negative consequences of a further standstill in cannabis policy until 2025 may not even be imagined. But it will not come to that, because the time is ripe, and it is now!