On June 7, 2018, after more than six months of review, the Senate sent Bill C-45, the Cannabis Act (Bill), back to the House of Commons (House) with 46 amendments (Amendments). Many of the Amendments were technical in nature and repair minor issues in a hastily-drafted Bill. Other amendments have been the subject of considerable debate and concern among supporters of the Bill and industry participants.

On June 13, 2018, the House released an Order Paper (Order Paper) indicating its intention to reject 13 of the Amendments. As we discuss below, the Order Paper indicates that the House will reject certain of the more noteworthy Amendments, including those in respect of: (1) home cultivation; (2) branding; (3) public disclosure of officers, directors and shareholders of licensed producers; and (4) parliamentary review of any new class of cannabis.

1. Home cultivation

The Amendments proposed allowing provinces and territories to place restrictions—including prohibitions—on home cultivation of cannabis that are more stringent than those proposed in the Bill, which allows for home cultivation of up to four plants. The House intends to reject this amendment, stating that the Bill allows provinces and territories the ability to impose their own restrictions, but that prohibiting home cultivation would contravene one of the Bill’s core objectives – displacing the illegal cannabis market.¹ To date, Québec, Manitoba and Nunavut have all indicated their intention to prohibit home cultivation, a decision that has been controversial and one we expect to face legal challenges in the Courts upon the Bill coming into force.

2. Swag/branding

The Amendments would have prohibited producers of cannabis and cannabis accessories from promoting their brands on non-cannabis-related items (hats, T-shirts, etc.). The Senate indicated that this amendment aims at reducing the appeal of cannabis products to young people. The House intends to reject this amendment, stating the Bill already contains comprehensive restrictions on promotion (e.g. limited to places where only persons above 18 years of age are permitted by law, a communication sent to an individual over 18 years of age, etc.).² In addition, the Bill is currently drafted such that the restrictions on branding would extend to products that fall within the definition of a “cannabis accessory”, such as vaporizers and other consumption products. As such, the restrictions on branding proposed by the Amendments would have affected not only licensed producers of cannabis, but also companies operating in other verticals of the cannabis sector.

3. Disclosure of investors

The Amendments proposed that the Ministry of Health establish and maintain a public registry of the names of certain persons, including all directors, officers and shareholders of a licensed producer (limited to shareholders who hold five percent or more of public companies). The House plans to reject this amendment, stating that it “would present significant operational challenges and privacy concerns.”³ Indeed, such a public registry would have been unprecedented, notably in comparison to other industries, such as tobacco and alcohol that are also strictly regulated for public health purposes.

4. New classes of cannabis

The Amendments proposed a requirement that any class of cannabis to be added to Schedule 4* after the date the Bill receives Royal Assent, must be laid before the House for review. This proposed amendment would further delay the legalization of certain cannabis-derived products (e.g. edibles), which will not be Schedule 4 products at the time the Bill receives Royal Assent. The Order Paper indicates that this amendment will be rejected due to appropriate mechanisms already existing, which provide for public scrutiny of federal regulations under the Bill.⁴

*Schedule setting out the classes of cannabis allowed to be sold under the Cannabis Act

Legislative showdown?

The Bill must receive acceptance from both the House and Senate prior to receiving Royal Assent and coming into force. With a Liberal majority, the motion on the Order Paper is virtually certain to be passed by the House, and the Bill sent back to the Senate for reconsideration.

Having received the message from the House, the Senate may

• Accept the decision of the House as to which Amendments will be accepted;
• Reject the decision of the House and insist on maintaining its Amendments; or
• Further amend what the House has proposed.

The Senate then sends another message to the House to advise which of these courses of action it will take. Communication between the two chambers can continue in this way until they ultimately reach a consensus. If they do not reach an agreement by exchanging messages, either the House or Senate can request a conference between the two chambers to discuss their differences (though this is very uncommon).⁵ Ultimately, if no agreement is reached, a bill can be delayed beyond the end of the current session, and die on the Order Paper. ⁶

While the Senate typically gives way to the elected officials of the House, the Bill has received more public and parliamentary scrutiny than most legislative initiatives. Some Senators have already indicated their disappointment with the House’s rejection of certain Amendments and may provide further resistance to the Bill as drafted.⁷ If the Senate is prepared to hold steadfast in regards to certain amendments, deadlock could ensue.

The House is sitting until June 22, 2018, but regular hours of debate have been extended until midnight Monday to Thursday in an attempt to pass the Bill and other draft legislation.⁸ Additionally, the Senate has stated that, if need be, it will sit into the summer in order to pass the Bill.⁹ Taking into account a transitional period requested by provincial governments, it expected that the legal sale of recreational cannabis will commence nationwide approximately 8-12 weeks following Royal Assent.

Dentons’ analysis

When the Bill was first announced, it was widely publicized that legal distribution of recreational cannabis would commence by July 1, 2018. The Federal Government has since disclaimed this as a target date, and there is still considerable uncertainty around what the amended timeline will be. It is possible that the House and Senate will reach an agreement on the Bill within the next week, which means the legal distribution of recreational cannabis could potentially commence towards the end of the summer. However, the rejection of certain Amendments presents the possibility that the Bill may receive further comment from the Senate, which will result in further delays.

Dentons’ leading Cannabis group will continue to work closely with industry stakeholders, and provide frequent insights on these important developments. If you wish to discuss the Cannabis Act and its possible implications for your business, or the Canadian cannabis industry, please contact Eric Foster or Benjamin Iscoe.

The authors also gratefully acknowledge the contributions of Ellery O’Hara for this insight.