European Cannabis Regulations: How Convergence Could Fuel a Better Investment Market

By Oliver Bennett, Special Contributor to New Frontier Data

Europe is a large market-in-waiting for the cannabis industry – potentially covering the spectrum from recreational use to medical cannabis, CBD products to industrial hemp. With a continent-wide population of 747 million people dispersed throughout 44 countries (28 of those being member states of the European Union) with largely progressive legislatures, it remains a grail for investors.

The European recreational market alone is huge: Some 25 million Europeans consumed cannabis in the past year, and it is the most commonly used illicit drug in the continent (with one estimate suggesting that about 1% of European adults consume cannabis daily). Decriminalisation and Dutch-style harm reduction measures have not had the negative impacts that some feared, and strong growth is expected to in the years following the pandemic, despite the uncertainty engendered in the CBD market by the European Union’s Novel Foods categorisation.

Meanwhile, medical cannabis is available to limited numbers of patients in most countries in the EU, among which most are readying themselves for further investment in their respective cannabis sectors.

Nonetheless, cannabis acceptance differs a great deal country by country, with usage, supply, and legality diverging markedly if despite the levelling effects of the EU. The 2020 EMCDDA drug report found that, similarly to state legislation in the U.S., there remain significant legal differences across European countries – with the obvious difference that no European country (unlike 11 U.S. states) yet has fully legalized cannabis within its confines.

To date, no European government supports full legalisation of cannabis for recreational use, and all threaten to levy prison sentences for illegal supply, although in recent years draft laws have been put forward to mitigate such. EU member states tend to take lenient stances on cannabis possession, despite national laws defining harder lines. The trend in recreational cannabis is tending toward legalisation – but again, at various speeds.

Per numbers of criminal offences, too, Europe features wide differences. The U.K. has seen offences declines, while Germany has seen prosecutions increase. In 2018, Spain accounted for 30% of Europe’s recorded cannabis offences, while Italy (with 29% more residents) had under 5% of them. In 2018 the Netherlands had 44 offences per 100,000 inhabitants, while Spain registered 673 offences per 100,000. Stark legal inconsistencies also exist in neighbouring states, such as the Czech Republic (which is decriminalising cultivation and possession for personal use) while Slovakia – part of the same country as Czechoslovakia until 1993 – has much stricter policies.

Thus, Europe remains a fragmented patchwork with legislative differences across its soft borders – though it is shortly to take a test that could be a game-changer.

Soon, the small country of Luxembourg may become the first European country to make cannabis completely legal, following having decriminalised it in 2001. Yet, optimism has been riven with qualms about both unwanted cannabis tourism, and effects on the illegal cannabis market trade in neighbouring counties including Belgium, France, and Germany. Nevertheless, Etienne Schneider, the country’s health minister, hopes for a precedent for leading legislation reform across Europe.

Another outlier with progressive laws is Switzerland (not in the EU), which has seen low-level THC (i.e., 1% or less by weight) made legal since 2017 for quantities below 10 grams, with doctors authorized to prescribe cannabis with higher THC to patients.

With such examples underscoring the continent’s discrepancies, it has been argued that a strong EU regulatory framework for medical cannabis is needed to make the industry more secure, while providing investors with stability and alleviating pressures on medical patients stressed by legislation.

There are moves to rectify such discrepancies. Last year the European Parliament called a resolution inviting the European Commission and EU governments to decide on a shared legal definition for medical cannabis.

Sita Schubert, secretary-general of the European Medicinal Cannabis Association (EUMCA) suggested that Germany’s regulatory approach to medical cannabis should be a model for Europe, while in Malta the MEP Miriam Dalli has advocated a strong EU regulatory framework on medical cannabis – citing her own country as a pioneer of regulatory best practices for medical cannabis as identified through its 2018 Production of Cannabis for Medicinal and Research Purposes Act (i.e., giving recognized businesses leeway to produce medical cannabis in controlled circumstances). Yet the European Commission (EC), as the executive body of the EU, does not expect any plan or legislative initiative on medical cannabis, save that it should adhere to the same regulatory framework as any other medicinal product.

Even so, the Herbal Committee at the European Medicines Agency (EMA) began discussions about medical cannabis with aims to establish a pancontinental memorandum of terms and definitions. Licensed medical cannabis receives the EU’s Good Manufacturing Practice (GMP) certification and a set of standards, while the EMA verifies compliance. The idea is that all medical cannabis in Europe should be produced and tested under GMP and circulated by Good Distribution Practices (GDP) certification.

To date, such processes are riven with delays in France, Germany, and elsewhere. For example, Denmark’s four-year experiment with medical cannabis began in 2018 with an evaluation due this year, before postponement due to lack of data. In 2017, the Danish government opened applications for authorization to cultivate, but – as with Germany – the locally cultivated cannabis has not made it to market.

Meantime, it will remain worthwhile to keep an eye on the respectively large European markets of the Netherlands and Spain, while also being cognizant of whether initiatives in smaller countries like Malta and Luxembourg serve to kick-start a continental consensus about cannabis convergence.