Goodbye summer break – what’s next for legalization?

Original auf Deutsch erschienen bei/original published by Krautinvest

Author: Kai-Friedrich Niermann, KFN+ Law Office

The summer break in Berlin is coming to an end, and the nervousness surrounding the legalization of cannabis will soon be on the rise again. What did we take away from the consultation process conducted by the Federal Government Commissioner for Addiction and Drug Issues in June and the industry meeting in Berlin in July (Mary Jane, GIF, ICBC)?

In this consultation process, it has become apparent, on the one hand, that the specialist medical addiction societies are exerting considerable pressure on the Ministry of Health, and want to bring about all possible restrictions in order to make the market as unattractive as possible. This has led to drug commissioner Blienert calling for a debate to restrict THC levels in cannabis products, but this has generated moderate interest. The German Hemp Association, LEAP Germany and other stakeholders from society and industry, however, have clearly spoken out against a strict restriction of a future market, and plead for the greatest possible deregulation, of course with full attention to health protection, youth protection and prevention

On the other hand, it became clear that imports will only become possible if Germany concludes trade agreements with other, like-minded nations within the framework of an inter se modification process. However, the negotiation of such bilateral or multilateral agreements can take a considerable amount of time (from two to five years), as intensive negotiation phases involving the sending of delegations, summits and final communiqués are required to produce a robust set of agreements.

Imports? Difficult at first!

There are difficult issues to be clarified, from the Single Convention to EU law. However, the German government has started to deal with this intensively and has initiated the first bilateral and multilateral talks. For example, a meeting of high-level government representatives from Luxembourg, Malta, Germany and the Netherlands took place on July 15, 2022. A joint statement was released noting the need to readdress policy on cannabis for non-scientific and non-medical purposes in Europe.

It has also been found that the international treaties and European law privilege the population’s own needs and that the introduction of respective regulations is much easier than the introduction of a commercialized, international trade chain.

That is why the traffic light coalition, even the initially hesitant one SPD, obviously also decided in favor of legalizing home grow and collective home grow (keyword: cannabis social clubs) in order to take pressure off the supply situation. This should be organized and controlled according to German association law. Details now need to be clarified, especially on the number of plants allowed. Cultivation clubs with more than 1000 members in larger cities or municipalities and corresponding „grows“ therefore seem quite possible. However, the aim of the traffic light coalition also remains to establish a commercial supply structure through licensed cannabis stores, as expressly agreed in the coalition agreement.

Whether enough products can therefore be available on the market at all when legalization begins next year seems questionable at present. According to Burkhard Blienert during his keynote speech at the ICBC in Berlin, a key points paper should be available in October, and a draft law in January 2022 at the latest. According to the normal course of events, a cannabis control law should then be passed in the Bundestag 4-6 months later. In the key points paper, the federal government will have to announce for the first time which dogmatic way out of the legal hyperconstructs of the UN and EU it wants to choose, and how products can be made available on the German market next year.

No cannabis stores without products

So, if legalization is to succeed quickly and legal, controlled products are to be offered on the (German) market, the first cultivation licenses would have to be issued and cultivation would have to begin next year. After all, every gram of recreational cannabis must be produced in Germany, either as a raw product or as a processed product before imports become possible.

Then it will also be necessary to issue licenses on a large scale and at low thresholds. Members of the BvCW have already called on politicians to quickly provide clarity on cultivation in Germany, as the intention is to build plants with an investment volume of €20-30 million. Should this come to pass, and probably the cultivation be carried out according to GMP (Good Manufacturing Practice), and the facilities possibly still have to be put out to tender, there will be no cannabis for consumption purposes in Germany before 2026/2027.

Growing cannabis is not witchcraft. With simple means, a safe product can be achieved. Things only get complicated when production is scaled up in large facilities, fertilizers, pesticides and other additives are applied, and standardization must take place on a medical level.

But why should smaller companies or other cultivation initiatives not be allowed to produce? Germany has been self-sufficient in most regions during the decades of prohibition, be it through individual home grow or smaller (of course illegal) cultivation units.

Thus, there are indeed significant opportunities for the domestic economy not only in wholesale and retail, but also in production. One problem, of course, remains the „carbon footprint“ of cannabis cultivation. In view of the current considerable price pressure on energy supply, farms themselves will probably be forced to use intelligent energy-saving solutions in cultivation in order to be able to maintain a correspondingly attractive price level.

Without a swift and large-scale licensing practice in the area of cultivation, however, there will not be enough „legal“ products in the German market, and without products there will also be no licensed business.

Cannabis Social Clubs yes, but safe!

The market for home grow, which already exists, has equally considerable potential for innovation and growth. There are already several large fairs that offer accessories for this. Furthermore, a flourishing trade for seeds and cuttings would also be established, as it already exists in Spain, the Czech Republic, Austria and the Netherlands.

However, this possibility must not be abused to circumvent the regulations of the licensed industry. „Cultivation clubs“ should therefore be subject to a notification requirement (and not a licensing requirement) and organized according to German association law. A close-meshed control must be guaranteed, in order not to get into the situation as in Spain, where the association idea is abused, de facto small business enterprises are led by individuals or several partners, and no taxes are paid to the state. This control is already possible with the current means of association law. The membership structure should therefore be reviewed regularly, just as a detailed annual review of the financial situation, especially fixed assets and income, must be carried out.

If there is also to be a supply through a commercialized retail chain, cultivation clubs must not be able to circumvent the rules of the licensed industry, which has to invest millions in building a retail structure. The corporatist approach of the „CSC“ must therefore always be in the foreground.

For example, if individuals have a right to possess three flowering plants (as the Green Party’s Cannabis Control Act proposes), they can transfer that right to a cannabis social club. But only once. Should short-term memberships be possible, and should tourists be allowed to join? These questions, in addition to the questions of how to ensure product quality and youth protection even in home grow and cultivation clubs, still need to be clarified. The draft cannabis control law already makes very concrete and easily implementable proposals in §§ 5 and 10.

In addition, the association should present a concept of how it intends to organize communal cultivation and communal distribution of the subsequent harvest with the permitted number of plants and its membership structure. An interesting idea was heard at the conference of the German Hemp Association in Berlin in June. There, it was suggested that any over production of the cultivation club be given to a commercial offshoot, such as a non-profit limited liability company (gGmbH), of which the cultivation club is the only shareholder. The production that the members do not need can then be sold to third parties who are not members of this cultivation club.

The are no limits to the imagination of grow clubs and small-scale commercial grows in terms of product variety and selection of different strains. The consumer will gratefully accept this offer. Large-scale producers, especially the three currently licensed producers in Germany, are also already eyeing this market, but should also be obliged to supply patients first and foremost. The production restrictions for these manufacturers should be completely removed, and German manufacturers should also be given the opportunity to export medical cannabis.

Plan B – absolutely!

If the draft law from the Federal Ministry of Health is passed In June next year, the long-awaited decriminalization of consumers and the commercial hemp market should also become a reality. Actually unbearable, as criminal investigations and judicial convictions are still taking place, but if it has served to have established a legal supply chain, the wait for the „all of a piece“ regulation may have been worth it. However, if it is foreseeable that the introduction of a corporatist and/or commercial supply chain will take longer time after all, the traffic light coalition will have to think again about an early decriminalization and the introduction of a §29b BtMG as well as an amendment of the Annex 1 BtMG with regard to commercial hemp, so that at least a small relief for consumers and hemp industry could be achieved in this legislative period!