High Stakes: Is The UK Finally Clearing A Pathway For Cannabis Investments?

• Published date: 19 August 2021
• Subject Matter: Cannabis & Hemp
• Law Firm: BCL Solicitors LLP
• Author: Mr John Binns

John Binns, Partner at BCL Solicitors LLP says it's high stakes when it comes to the UK finally clearing a pathway towards cannabis investments

Businesses that work in the cannabis industry are accustomed to regulatory issues, but the UK's rules are both stricter than those of other jurisdictions, and more complicated than they need to be. As an increasing number of businesses seek to list in the UK, the Financial Conduct Authority's consultation on a new Technical Note (following an earlier Statement on its approach), covering the issues they will face in their applications is certainly welcome. But there are four areas in which it might consider going further.

Involvement from other agencies

The first is to involve other agencies in its approach, given that overlapping issues are being considered by the Home Office (which licences cannabis activities), the National Crime Agency [which receives requests for consent under the Proceeds of Crime Act 2002 (POCA)], and the Medicines and Healthcare products Regulatory Agency (MHRA) [which regulates medicines, including Cannabis-Based Products for Medicinal use in humans (CBPMs)].

While the FCA would rely on the Home Office and the MHRA to deal with the question of UK-based CBPMs, it seems keen to make its own assessment with respect to equivalents overseas. The problem is that its assessment is, essentially, about whether the business would be licensed if it happened in the UK - so it is not hard to see why some consistency of approach between UK agencies would be desirable. In the absence of a single cannabis-regulating agency here, it is incumbent on these agencies to work together.

A margin of appreciation

The central recommendation of the Note is that businesses wishing to list should obtain a legal opinion to cover, among other things, the question of whether their overseas activities would be lawful in the UK. Because different jurisdictions have different legal systems and different ways of licensing CBPMs, the exercise will often be one of finding approximate equivalence and 'best fit', allowing for some leeway in terms of what other jurisdictions allow and require. In other legal contexts, this would be called a 'margin of appreciation', a recognition that lawmakers in other countries are entitled to do things in their own way, provided they fit broadly within a minimum set of requirements. In due course, we will find out how the FCA will apply these standards, but in the meantime, it will need those...