Investor Interest and The Legalisation Of Cannabis In Malta

Investor Interest and The Legalisation Of Cannabis In Malta

08 August 2022

Across the EU, the cannabis market is expected to grow from €403 million in 2021 to reach €3.2 billion by 2025. In December the Cannabis bill was approved in Maltese Parliament, making it the first EU country to allow small amounts of cannabis cultivation and possession for personal use. Spain recently became the latest EU state to decriminalise cannabis for medical use, with other EU countries taking similar measures including France, Romania, Italy, Germany.

The liberalisation of the cannabis industry and the relaxation of legislation across Europe and North America has resulted in phenomenal growth in cannabis sales. Globally, sales increased from $21 billion in 2020 to $29 billion in 2021 and are expected to reach $35 billion this year, according to Jason Wilson, cannabis research and banking expert at ETF Managers Group. The result of this huge spike in growth has spawned a list of  start ups, IPOs and M&As as businesses have taken advantage of the relaxation in national laws.

Most lawyers agree that with legislation changing within countries and across borders, companies are now eyeing multiple business opportunities, many often involving international investment and M&As.

As a highly regulated industry across the world, the deregulation of the cannabis industry is now offering businesses and their advisors huge opportunities that were simply not available until recently.

As the industry grows, so will the need to adapt to a fast changing legal landscape that accompanies it.

In a recent publication issued by IR Global, AE Legal’s Kris Scicluna  gave his insights on the recent changes to legislation on medicinal cannabis and CBD in the local jurisdiction.

What are the risks of CBD production and sales in your jurisdiction?

Malta has now de-criminalised the personal use of cannabis and permits growth for personal use of (a max of 4) cannabis sativa plants, to harvest weed, as well as the commercial production and importation of non THC cannabis (known as hemp) for medicinal use.

The regime in Malta is one of the most progressive in the world and is likely to develop. This will give rise to new commercial opportunities. The risk is that some commercial operators will try to jump the gun and do more than the law allows at any given time.

Otherwise, the risk of penalty and sanction will be low for any individual or entity observing and adhering to the licensing requirements laid down in the Production of Cannabis for Medicinal and Research Purposes Act (Chapter 578 of the Laws of Malta), and of the law itself.

Thus, a licensed operator must adhere to detailed regulations on quality-assurance, security, monitoring of the production facility, import and export, storage and possession, reporting obligations, and advertisement.

The storage and possession of the harvest from local cultivation must satisfy the requirements set out in the relevant legislation.

Each finished unit product pack shall display the respective serial number, in a tamper-evident manner, as established by the regulatory authority, prior to any transactions related to the product.

The advertisement of cannabis to the public as a treatment for any medical condition is, in terms of the Medicines Authority General Guidelines on the Production of cannabis for medicinal and research purposes expressly prohibited.

Advertising the product in Malta would, therefore, appear to be risky and unadvisable. There are, however,(EU) Single Market issues to take into account for the Court of Justice of the European Union, which interprets EU law, has ruled (C-663-18) that: No Member State can preclude the advertisement of a CBD product lawfully produced in another Member State in view of the fact that CBD is not a ‘drug’ within the meaning of the Single Convention of the United Nations, due to its lack of ‘psychoactive ingredient’.

What are the different types of CBD products and how are they defined?

The law does not make a distinction between CBD products themselves (although all require a prescription in order to be administered medically).

The main legal distinction is between THC and CBD, and this is made in the penal code: Cannabis is defined in the Dangerous Drugs Ordinance (Chapter 101) as “the inflorescence and leaves of any plant of the genus Cannabis and includes any resin obtained from the said plant and any preparations derived from the said plant”.

This definition excludes seeds or cannabinoid products that have as much as or less than zero point two (0.2) percent of tetrahydrocannabinol (THC). As long as the cannabinoid product has a THC content of not more than 0.2%, then it is not subject to the criminal sanctions found in the Dangerous Drugs Ordinance.

The distinction is not easy to make:

• It can be very difficult to distinguish CBD flowers (commonly known as hemp flowers) from THC flowers (commonly known as weed).
• The CBD hemp flower is so similar in appearance to its ‘cousin’ THC that the police, in Malta and overseas, have often seized “marijuana” only to find that it was perfectly legal hemp. Therefore, when it comes to the transport and storage of CBD products, it is necessary to provide evidence that the product is actually a CBD product (i.e. <0.2% THC content) since THC products are much more heavily regulated and are not commercially trade-able in the free and open market.

What is the current legal status in your jurisdiction? Is there an adequate legal framework?

The cannabis legal framework in Malta is now one of the most progressive within the EU and beyond.

That said, the situation created by the new law is not yet satisfactory and requires refinement. There is still too much scope for conflict between the obvious spirit of the law and the actual enforcement on the ground:

There still is uncertainty amongst public authorities, like the police, over what legally constitutes legal cannabis. Indeed, a petition has recently been presented to the Parliament of Malta urging lawmakers to amend Malta’s year-old cannabis laws to explicitly exclude forms of cannabis that do not provide any ‘high’ from the threat of prosecution.

The situation came to a head with the arraignment last March (2022) of a medical doctor, Andrew Agius, who stands accused of importing and trafficking the drug after police seized CBD cannabis flowers from his clinic, a pain treatment centre, last February.

The case revolves around the interpretation of the abovementioned 2021 definition of CBD ‘product’ in the penal code.

When Agius was charged in court, prosecutors argued that the CBD flower they seized from his clinic is a narcotic and subject to seizure and prosecution.

Agius’ lawyers, on the other hand, say that the flower in question contained less than 0.2% THC and is a CBD ‘product’, much like CBD oil, shampoo, or facial cream, which can all be sold without restrictions.

The situation has led the petitioners to ask MPs to fix this legislative anomaly by explicitly excluding all CBD products, including flowers, leaves and resin, from the scope of criminal prosecution and to start a public discussion about business and agricultural opportunities concerning CBD and hemp products. Petitioners also refer to classifying CBD as a ‘novel food’, something the European Commission is in the process of doing after following the aforementioned CJEU judgement.

This interview originally appeared in a publication by IR Global entitled: Attracting Investor Interest – Will the cannabis industry be allowed to blossom?