Bermuda's Cannabis Licensing

Bermuda’s Cannabis April 2021 Licensing Act

Introduction Current Status The Cannabis Licensing Act On 19 February 2021, the lower house The rejection of the CLA in Bermuda’s Senate 2020 of Bermuda’s Parliament (the “House”) does not spell the end for the legislation in Anyone familiar with the cannabis passed the Cannabis Licensing Act 2020 its current form. Due to the provisions of regulatory scheme in Canada will see (“CLA”). The legislation was, however, Bermuda’s constitution, the Senate’s decision many aspects of that system incorporated rejected by Bermuda’s upper house, the may only delay the passage of the CLA by 12 into the CLA. However, as discussed Senate, and sent back to the House on months. As a result, it remains worthwhile further below, the CLA presents in certain 3 March 2021. Bermuda’s Government understanding the CLA, particularly as important respects a conservative approach has nevertheless committed to pressing Bermuda’s cannabis regulations impose to legalisation. The legislation addresses forward with the legislation. greater restrictions in some respects than three main facets of cannabis legalisation regimes in the United States and Canada, as in Bermuda: (a) the establishment of As of the date of writing, passage of further described below. a “Cannabis Licensing Authority” (the the CLA would make Bermuda the first Bermuda’s constitution permits the House “Authority”) to regulate and carry the offshore location to join a growing number to pass a new bill that is identical to the intent of the CLA into effect; (b) the of jurisdictions legalising (or taking bill previously rejected by the Senate. Once creation of a licensing system that will be steps to legalise) the cultivation, import/ the new bill is passed by the House, it will managed and overseen by the Authority; export, and sale of both medical and be presented to the Governor for Royal and (c) the removal of cannabis from the recreational cannabis. As an established Assent, even if the Senate rejects the new list of controlled drugs and the creation of offshore jurisdiction with a globally bill a second time. Though the new bill must a regulatory offences scheme. respected regulator, Bermuda presents an be identical to trigger this mechanism, the attractive location for investors interested House can include suggested amendments The Cannabis Licensing Authority in the still-nascent, but rapidly growing with the second attempt that the Senate The Authority would be created to cannabis industry. As established cannabis may include should it vote in favour of the “regulate the cannabis industry and advise companies in North America mature, new bill. These suggested amendments the Minister”. The Minister responsible for Bermuda also presents a known solution would not prevent the new bill from being drug prevention would have broad powers for offshore corporate structures. sent for Royal Assent. under the CLA to manage and direct the functioning of the Authority, which would also provides for certain mandatory terms would be given broad powers under be funded primarily from sums approved and conditions applicable to all licences, the CLA with respect to the regulatory for the Authority by the legislature including compliance with Authority offences and enforcement of the terms and monies received through licensing guidelines and the terms of the licence. and conditions of licences activities. The Minister would also have the power to appoint a board, comprised Offences and Enforcement Early Entrants in the Market of five voting members from five relevant The CLA would remove “cannabis”, disciplines (health, research, business, “cannabinoids”, “cannabis resin” and In 2019, Canadian companies and investors planning and agriculture) and three non- “hemp” from the Misuse of Drugs Act demonstrated that there is significant voting Government officials (the Attorney- 1972. The CLA then sets out several new upside for early entrants in the cannabis General, the Collector of Customs and regulatory offences, including a broad industry. Of course, entrants in Canada were limited by the emerging international the Director of National Drug Control). offence for undertaking activities without recreational market. Since 2019, numerous The Authority would then appoint an a licence, which is the only new offence states in the United States have legalised executive director responsible for day-to- under the CLA that carries the potential recreational use, though it remains day management of the Authority. for indictment. Also of note is that use illegal at a federal level. President Biden’s of cannabis in a public place is made an administration has vocalised support for The Licensing System offence under the CLA, with the exception federal decriminalisation, but has stopped There are eight types of licences of use in public retail shops or at cannabis short of full legalisation. The passage of a contemplated under the CLA: cultivation, events. bill in Mexico on 10 March 2021 to legalise retail, import, export, manufacturing, recreational cannabis adds to the growing research, transport and event licences. The offences also establish the maximum movement towards legalisation. As it public possession limit, being seven grams Cultivation and manufacturing licences continues, this trend presents significant for individuals 21 years of age or older. are divided into tier 1 licences for personal opportunities for companies and investors, This provides another example of strict use and tier 2 licences for commercial use. particularly those with a head start and Manufacturing under the CLA refers to established regulatory activities related to processing of edible reputations and flexible cannabis and similar products (eg oils or structures. resins). This tiered system goes further than cannabis regulations in many other Bermuda already provides jurisdictions by requiring licences for a mature offshore personal activities in addition to commercial jurisdiction for cannabis activities. Other regimes generally licence investors, whether through the inputs required for personal cultivation the establishment of a fund or “manufacturing”, like seeds or oils, or through tax efficient rather than the personal activity itself. corporate structures. Notably, retail licences under the CLA Bermuda’s sole regulatory would include “sale and consumption of body, the Bermuda cannabis”, suggesting cannabis bars and Monetary Authority similar establishments would be permitted (the “BMA”) released a under the proposed Bermuda regime. notice in November 2019 limits in Bermuda. Many jurisdictions in indicating that it would not object to BMA- The licence application process, which is North America have legalised recreational regulated-entities conducting business with largely set out in the CLA, is quite involved. cannabis or have passed legislation to cannabis industry participants where such Specific requirements are dependent legalise it, notably Canada1 and 19 states business is legal in the jurisdiction of origin on the type of licence sought. Based on in the United States. at a federal level, like in Canada. the information required of applicants under the CLA, the Authority would Enforcement of obligations and limitations have significant discretion in deciding prescribed under the CLA would be whether to grant a licence and what conducted by inspectors designated by the terms and conditions to impose. The CLA Minister, or by police officers. Inspectors

Alaska District of Columbia Michigan New York Vermont Arizona Illinois Montana Nevada Virginia California Maine New Jersey Oregon Washington2 Colorado Massachusetts New Mexico South Dakota

1. See https://www.justice.gc.ca/eng/cj-jp/cannabis/

2. As at the time of writing, according to the database maintained at https://norml.org/laws/legalization/ by the National Organization for the Reform of Marijuana Laws, NORML. This list is subject to change. Please note that Walkers Bermuda does not advise on the laws of these states. References to the laws of these states is for illustrative purposes only based on currently available public information and does not constitute legal advice. Authors For further information, please speak with the authors, below, or your usual Walkers contact.

Sarah Demerling, Partner Melanie Fullerton, Senior Associate Investment Funds Regulatory T: +1 441 242 1525 T: +1 441 242 1537 E: [email protected] E: [email protected]

Nicholas Howard, Associate Insolvency & Dispute Resolution T: +1 441 242 1550 E: [email protected]

The information contained in this advisory is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.