• Tuesday, May 7, 2024
Trouble in the Channel: The Hemp Farmer, the UK Government & the Exempt Product Criteria – Josh Normanton

In the following article, Trinity Regulatory and Criminal barrister, Josh Normanton analyses the impact of the landmark CBD product judicial review case of R (on the application of Jersey Hemp Limited) v The Secretary of State for the Home Department, that he was recently instructed in.

Trouble in the Channel: The Hemp Farmer, the UK Government & the Exempt Product Criteria

This year saw the conclusion of an epic David v Goliath battle over the meaning of the exempt product criteria (“EPC”) contained in Regulation 2 of the Misuse of Drugs Regulations 2001 (“MDR 2001”). Jersey Hemp Ltd (“Jersey Hemp”), a hemp cultivator based in Jersey, succeeded in their judicial review of a decision of the Home Office which prevented them from importing their cannabidiol (“CBD”) products into the United Kingdom. I was instructed counsel for Jersey Hemp in the judicial review.

Although the judicial review engaged a range of legal issues, this article examines what it is capable of telling the CBD industry about the EPC and the legality of their products. The article also presents an opportunity to explain why the EPC is important to the industry, how I consider the EPC should be interpreted, and how the UK Government interpreted the EPC wrongly in this case (an interpretation which, if allowed to stand, would have been devastating for the CBD industry in the UK). 

I will introduce the respective parties to the case and set out what took place below. To understand the case in its proper context, it is necessary to explain first why the EPC are crucial to the existence of the CBD market in the UK (UK market value estimated at £690 million in 2021 but growing exponentially). 

CBD is a chemical (or cannabinoid) found naturally in cannabis plants. It has a range of health and therapeutic uses (although medical benefit is disputed). CBD is not itself a controlled drug although parts of the cannabis plant are controlled drugs as are certain other chemicals which can also be extracted from the plant (see s.37 of the Misuse of Drugs Act 1971 (“MDA 1971”) and Schedule 1 to the MDR 2001). CBD is obtained by extracting it from the cannabis plant, for example by CO2 extraction or using a liquid solvent. CBD products are then created by dissolving the CBD in a “carrier” substance. In this case, the carrier was a hempseed oil and the process created CBD oil.

The process of extracting the CBD from the plant aims to remove all controlled chemicals leaving only the CBD. However, this process is notoriously difficult and sometimes impossible depending on the extraction method used. As a result, a trace level of the chemical tetrahydrocannabinol (“THC”) usually remains within the extract. THC is a controlled substance and therefore subject to prohibitions on supply, importation and possession. On its face, the presence of THC in CBD extracts creates a problem for those involved in the CBD market. The problem is both fundamental and absurd. Those selling a “health product” without any psychoactive effect may be treated as drug dealers because their product contains the mere trace of a controlled drug (which in trace form is extremely unlikely to have any harmful effect). Various legal solutions have been mooted over the past 10 years to address this problem, some more wild in nature than others. For example, ignoring the problem completely is a strategy I have seen repeatedly, usually to the eventual detriment of the business.

Treating products with traces of controlled drug as exempt products is probably the only viable solution to the problem.

Regulation 2 of the MDR 2001 describes an exempt product:

“exempt product” means a preparation or other product consisting of one or more parts, any of which contains a controlled drug, where -

(a) the preparation or other product is not designed for administration of the controlled drug to a human being or animal;

(b) the controlled drug in any component part is packaged in such a form, or in combination with other active or inert substances in such a manner, that it cannot be recovered by readily applicable means or in a yield which constitutes a risk to health; and

(c) no one component part of the product or preparation contains more than one milligram of the controlled drug or one microgram in the case of lysergide or any other N-alkyl derivative of lysergamide.”

A product which, in its nature, meets all of the criteria (a) to (c) above is exempt from restrictions on importation, production, supply and possession on controlled drugs in the MDA 1971 as well other restrictions contained in the MDR 2001. Such a product will not be treated as a controlled drug and persons dealing in the product will not be criminalised. This is a perfect solution.

But how does a company know if their product meets the EPC? Although all companies should seek independent legal advice to categorically ascertain the legal character of their products, the answers seem to be contained completely in the wording of the Regulations set out above. A practical example aids understanding. Consider a CBD oil with only a trace of THC in it:

  • The oil would likely comply with criterion (a) of the EPC because it is designed and manufactured for the administration of CBD to a human. It is not designed for the administration of THC (which is just there as a byproduct of the manufacturing process);
  • The oil would likely comply with criterion (b) because it would be extremely difficult for any person to extract the trace of THC from the product by scientific or any other means; and
  • Assuming the THC is below 1mg per unit (a unit being the CBD oil bottle size), then criterion (c) is also met. It is possible to demonstrate this criterion by reference to scientific analysis showing the level of THC in the product.

This short practical example shows how use of the EPC is capable of easily justifying the legality of many CBD products.

Armed with this understanding, one can better understand the significance of Jersey Hemp’s judicial review (The King (on the application of Jersey Hemp Ltd)  v Secretary of State for the Home Department and the Minister for Health and Social Services (Government of Jersey)).

Jersey Hemp operated an organic hemp farm in Jersey. Hemp is a form of cannabis (Cannabis Sativa L.). Jersey Hemp operated in accordance with a licence granted to it from the Government of Jersey (“GoJ”). It manufactured cannabis oil using its hemp and exported it to the UK market for a number of years without issue. It did so without requiring an export licence from GoJ or an import licence from the UK because it considered its product met the EPC (and GoJ agreed with this position until the events described below).

Although GoJ is an independent jurisdiction, the GoJ signed a memorandum of understanding (“MOU”) with the UK Home Office which permitted the Home Office’s Drugs and Firearms Licensing Unit (“DFLU”) to operate in Jersey. The ultimate purpose of the DFLU in the MOU was to ensure that Jersey was complying with international drug treaty obligations. Pursuant to the MOU, the DFLU made compliance visits in Jersey and advised GoJ on licensing.

On 19 April 2023, Jersey Hemp was subject to such a compliance visit in Jersey. The Head of the DFLU was among the visitors and seems to have had at least some responsibility for what occurred. At the visit, Jersey Hemp were informed that their product did not meet criterion (a) of the EPC and therefore it was subject to restrictions on controlled drugs. DFLU went on to give the same advice to the GoJ. As a result, Jersey Hemp was prevented by both the DFLU and the GoJ from exporting its product to the UK, its largest market. The effect of this on the business was completely devastating.

But the DFLU’s decision – made seemingly at the highest levels in the organisation – was completely  wrong.

The decision was based on the DFLU’s interpretation of Home Office guidance which stated:

“It is likely that the product will be subject to regulation as a medicinal product (or to an equivalent UK regulatory standard) as a way of demonstrating that there is no intention of administering the controlled drug element of the product (referred to in [criterion] (a)”

On the basis that Jersey Hemp’s product was not subject to regulation as a medicinal product (or equivalent), the DFLU considered there was insufficient evidence that criterion (a) was met.

In short, the DFLU had set an extremely high evidential threshold which companies had to meet in order to demonstrate compliance with criterion (a) of the EPC. It is not difficult to see the extremely profound consequences for the CBD industry if this approach was left unchallenged. If companies were now required to demonstrate compliance with intensive regulatory standards in order to meet the EPC then that would place a massive burden on market participants. It would inevitably mean the complete devastation of the industry in the UK.

Jersey Hemp, somewhat bravely, decided to judicially review the DFLU’s decision. They did so on the basis that the Home Office had misinterpreted its own guidance as well as the Regulatons. The key points advanced were these:

  • The Home Office guidance must be read in a way which is consistent with the relevant statute. There was no condition in the EPC equivalent to that which the DFLU was imposing on Jersey Hemp;
  • There was already a different type of exempt cannabis-based product (the CBPM) in the MDR 2001 which was subject to medical regulation by definition. The DFLU’s interpretation of the EPC, if correct, had an extremely peculiar outcome as it meant the legislation imposed medical regulation requirements either explicitly or implicitly depending on which part of the statute one read. This cannot have been the intention of legislators;
  • The wording of the guidance (“it is likely”) was clearly not establishing a mandatory requirement; and
  • The DFLU’s decision was also contrary to other government guidance, for example from the Government Chemist, which stated that the EPC applied to other CBD products.

After permission was granted, the Home Office conceded the claim. The Home Office formally conceded that criterion (a) of the EPC did not set a high evidential threshold and did not require proof of “regulation” or equivalent. The Home Office also accepted that a proper approach to showing compliance with criterion (a) of the EPC would involve assessing a variety of factors and evidence, which could include but would not be limited to the product’s stated purpose; the product’s advertising, packaging and presentation; the product’s administration technique, the product’s labelling, marketing and supply chain, and manufacturing technique. In short, good sense prevailed.

The effect of the concession was that the DFLU’s advice/decision given in Jersey was quashed by the Administrative Court on 16 February 2024. Unfortunately, for Jersey Hemp the case is far from over. They are now taking legal action before the King’s Bench Division to claim damages for the very considerable losses occasioned by the DFLU’s decision.

The case is a cautionary tale to all on the importance of interpreting the EPC correctly. Even those in the most senior positions in licensing and enforcement are at risk of misinterpreting and misapplying the EPC, to the detriment of CBD companies. In a broader sense, although a painful learning experience for DFLU, the outcome hopefully indicates the adoption of a more measured, sensible and holistic approach by the UK Government in determining whether CBD companies have demonstrated compliance with the EPC. This can only be good for the CBD  industry which has been desperate for certainty on the meaning of the EPC for some time. 

Josh Normanton is an expert in cannabis and CBD licensing matters and is frequently instructed to provide advice and representation to companies and individuals. Josh is regularly recognised in the leading legal directories, recent entries include:

"A dream for solicitors: he provides written advices promptly and just generally goes above and beyond the call of duty." "His paperwork is first class, and he is a very hardworking and diligent advocate."
"A formidable junior who is a silk in waiting” “He’s good fun, easy to deal with, committed and someone who will always fight your corner"
"Whether he is drafting submissions or advocating in court, his work is always excellent.” “The clients love him, and his results speak for themselves.” “Displays great depth of knowledge and superb attention to detail"
Chambers and Partners

For further details, email j.normanton@trinitychambers.co.uk or the clerking team, criminalclerks@trinitychambers.co.uk, tel 0191 232 1927.