Big changes may be coming for European CBD regulation. Here’s what you need to know
Recently-announced plans by the European Commission to regulate CBD from hemp flowers as a narcotic will have far-reaching consequences for the European CBD industry. In this article, we break down what the potential decision means for EU and UK companies, and what possible flashpoints for reform lie ahead.
Background:
In January 2019, the European Commission designated cannabinoids as ‘unauthorised novel foods’. This means that CBD (and other cannabinoid-containing) extracts are required to go through the EU’s novel food authorisation procedure to prove that they are safe for consumers before they can be used in supplements, food or drink.
More than 50 applications for cannabinoid-based ingredients have been submitted. During this time not a single application for hemp-derived CBD products has passed the initial validation stage, which is overseen by the European Commission. In contrast, at least three applications for synthetic CBD isolate have been validated and passed over to the European Food Safety Authority (EFSA) for a technical review. EFSA’s safety appraisals for the three sources of synthetic CBD are underway, with the first opinion on product safety for CBDepot’s synthetic CBD due from December 2020 onwards.
What is the new announcement?
The European Commission has announced that it plans to reject novel food applications for products made from hemp flowers, on the basis that they constitute an ‘extract of cannabis’. This news follows months of ‘internal consultation’ within the Commission, and operators with related novel food submissions have been informed of the EC’s preliminary view. Applicants have two months to submit comments in advance of a final decision, although the one submission for hemp-derived CBD listed on the Commission’s summary of applications has already been removed. In the meantime, it has been reported that all further novel food applications for flower-derived CBD will be paused until the Commission’s view is confirmed. The Commission’s view that flower-derived CBD meets the definition of a narcotic is not new, and mirrors the Commission’s position that flower-derived CBD should not be used in cosmetics. However, while few Member States enforce against the source of CBD cosmetics, the novel foods announcement has clearer and likely significant consequences for Europe’s CBD industry.
What’s the basis for the European Commission’s view?
The European Commission argues that under international treaties, CBD extracted from hemp flowers constitutes a narcotic and so cannot be used as a food ingredient.
The definition of ‘food’ established by the EU General Principles of Food Law excludes substances that are considered narcotic or psychotropic under the UN Single Convention of Narcotic Drugs (1961). If a substance is considered a narcotic, it cannot be used as a food ingredient within the EU.
Under the Single Convention, ‘Cannabis and cannabis resin’, and ‘Extracts and tinctures of cannabis’ are considered narcotics. The Single Convention defines the ‘cannabis plant’ as “any plant of the genus Cannabis” - regardless of the plants’ THC content, or whether national regulations distinguish between ‘drug’ type cannabis or industrial hemp. ‘Cannabis’ is then defined as “the flowering or fruiting tops of the cannabis plant (excluding the seeds and leaves when not accompanied by the tops)”.
CBD itself is not regulated per se by the Single Convention. However, the Commission argues that CBD extracted from the flowers or fruiting tops of the cannabis plant - regardless of whether the CBD was extracted from legally-grown hemp, and whatever the extract’s THC content - constitutes an ‘extract of cannabis’ and so cannot be used as a food ingredient within the EU.
What does this mean for EU markets?
If adopted, the European Commission’s interpretation will block the compliant sale of flower-derived extracts as a food product across the EU. Ingestibles are by far the largest CBD product category in the EU and the vast majority of products use a hemp-flower derived extract. It is also not clear at this point what impact the Commission’s decision could have for the formulation and export of CBD products in the EU, or even national policy on a number of linked activities e.g. CBD extraction.
Eliminating the main pathway to legal sales would be a significant setback for the industry as a whole, and a major blow to operators who have invested heavily in a novel food application. Companies may find it harder to attract needed investment, and FMCGs and listed companies eyeing Europe as a medium-term entry-point for CBD may be dissuaded from doing so. Across European countries, enforcement against CBD products is likely to increase. While this is the job of Member States and enforcement varies by country, states will likely take a harder line against products branded as ‘narcotic’ that contain prohibited food ingredients, rather than simply ‘unauthorised’ novel foods.
Some operators will likely respond to changes by re-labelling products as non-food items, or obscuring the source of CBD used. However, a more sustainable path to survival lies in innovation - such as switching CBD source, developing and scaling alternative sources of CBD, pivoting to new product formats, and exploring international markets.
Are UK operators affected?
UK operators would not be directly affected by the European Commission’s decision. The UK already deviates from EU novel food rules with a ‘phased enforcement’ approach, and from January 2021 will operate an independent scheme for novel food approval.
The UK’s policy on cannabis and cannabinoids is set by the Home Office, which does not consider pure CBD a narcotic. Unlike the EU, the UK does not differentiate between CBD from the hemp plant or synthetic sources - whether a product is considered a narcotic instead depends on whether it contains detectable levels of controlled cannabinoids (eg THC). The UK’s Food Safety Authority (FSA) has confirmed that it follows Home Office policy in this area, meaning that UK operators will be able to submit applications for hemp flower-derived CBD once applications open in January 2021.
The UK’s divergence from the EU establishes it as having one of the clearest pathways to legal CBD sales in the world. This is likely to draw attention beyond the local, cannabis-specific outfits that have so far defined the industry, increasing competition in what is already a crowded market. Firms with the resources to submit valid novel food authorisations will be rewarded with market share, while those who do not will be left exposed once UK compliance ramps up in April 2021. While the UK charts its own course, in practice many CBD companies have a multi-country presence and are heavily reliant on European supply chains. Disruption in the EU could have a knock-on effect in the UK, and potentially skew import reliance further towards the US and other international sources.
Could the Commission's position change?
It’s not known when the European Commission will issue a final decision on the validity of flower-derived CBD extracts. However, two events due before year-end could have a decisive impact on the final EU policy:
UN Rescheduling:
Several amendments to international treaty scheduling of cannabis have been proposed and are due to be voted on by the UN’s Committee on Narcotic Drugs (CND) in December. One proposed amendment would delete the category of ‘extracts and tinctures of cannabis’ from the Single Convention altogether, while another would clarify that CBD preparations containing less than 0.2% THC are not under international control.
A positive vote on the second proposal in particular would confirm that CBD isn’t considered a narcotic according to the Single Convention, and would pave the way for hemp-derived novel food applications to resume. However, it is currently unclear whether either amendment has the support required to pass, and the European Commission has not recommended that Member States support either amendment. Delays to CND votes are also commonplace, and it is possible that the vote will be postponed again.
CJEU ruling on Kannavape case:
At present, France prohibits the sale of CBD products produced from hemp flower on the basis of its national narcotics laws. After the French company Kannavape was prosecuted for importing CBD products from the Czech Republic, the European Court of Justice (CJEU) will issue a ruling later this year as to whether restricting the sale of CBD products legally produced in other EU countries contravenes single market principles. CJEU rulings are binding on EU institutions as well as Member States, meaning a CJEU decision on whether CBD constitutes a narcotic or not would have to be respected by the European Commission going forward. A draft opinion by the CJEU Advocate General in May this year stated that CBD is not classified as a narcotic drug under international conventions, and does not fit treaty definitions for an ‘extract of cannabis’. If the final CJEU ruling takes this view, then the Commission would have to revise their position. However, it is possible that the end ruling, due from September onwards, may use different arguments or even adopt a differing conclusion to the Advocate General.
