December 1, 2020

Court of Justice of the European Union on cannabidiol: CBD is not a narcotic drug and marketing prohibitions must be appropriate to and strictly necessary for protecting public health

On November 19, 2020, the Court of Justice of the European Union (“CJEU”) ruled on cannabidiol (“CBD”) in case C-663/18. The CJEU held that national legislation prohibiting the marketing of CBD extracted from the Cannabis sativa plant in its entirety and lawfully produced in another Member State violates the principle of free movement of goods between Member States, unless such prohibition is needed to reach the goal of protecting public health and does not go beyond what is necessary for achieving that purpose.

This judgment is particularly important for the following main reasons:

First of all, according to the CJEU, the CBD extracted from the entire Cannabis sativa plant cannot be regarded as an agricultural product (and, consequently, it is not covered by Regulations (EU) No. 1307/2013 and No. 1308/2013[1]), nor can it be regarded as a narcotic drug under the definition provided in Article 1 of Council Framework Decision 2004/757/JHA of October 25, 2004 (“Framework Decision 2004/757”), which refers, among other things, to the Single Convention on Narcotic Drugs of 1961 (“Single Convention”).

Furthermore, the CJEU stated that the prohibition on marketing CBD lawfully produced in another Member State and extracted from the Cannabis sativa plant in its entirety constitutes a measure having equivalent effect to quantitative restrictions under Article 34 of the Treaty on the Functioning of the European Union (“TFEU”). Consequently, it can be justified only if it is appropriate and strictly necessary to protect a public interest, such as the public health.

This decision could have significant consequences on CBD regulation throughout Europe, including in Italy.

1. The case at issue and the matter referred for a preliminary ruling
At issue was a French case against two former directors of a French company (“Applicants”) that marketed Kanavape, an electronic cigarette with a liquid containing CBD extracted from the entire Cannabis sativa plant. This CBD was legally grown and produced in the Czech Republic and then imported by a French company that packaged it in cartridges for electronic cigarettes. However, French Public Health Code provisions on poisonous substances allow the cultivation, importation, exportation, and use of hemp exclusively if, inter alia, only the fiber and seeds of the plant are used.

In this context, the Criminal Court of Marseille found the two Applicants guilty of infringing the abovementioned provisions, among others, since the CBD produced in the Czech Republic was extracted from the entire plant.

The Applicants in the main proceedings entered an appeal with the Court of Appeals of Aix-en-Provence, in particular against the prohibition on marketing CBD resulting from Cannabis sativa in its entirety, which they claimed was contrary to EU law. The Court of Appeals issued a stay in the proceedings and referred the matter to the CJEU for a preliminary ruling. The CJEU was asked to determine whether, according to Regulations (EU) No. 1307/2013 and No. 1308/2013 and the principle of free movement of goods, the national provisions prohibiting marketing hemp extracted from the entire plant – and not solely from its fiber and seeds – are in accordance with EU law.

2. On the non-applicability of Regulations (EU) 1307/2013 and No. 1308/2013

Both Regulation (EU) No. 1307/2013 and Regulation (EU) No. 1308/2013 govern the agricultural markets, and they apply to products listed in Annex I to the Treaty on the European Union and to the TFEU (“Annex I”), with a few specific exceptions, such as fishery products. Annex I refers to heading 57.01 of the International Convention on the Harmonised Commodity Description and Coding System[2] (“HS Convention”), now heading 53.02 thereof, whose list of agricultural products includes “true hemp (Cannabis sativa), raw or processed but not spun; tow and waste of true hemp (including pulled or garnetted rags or ropes).

By way of interpretation, the CJEU holds that the CBD at issue in the main proceedings does not fall under that definition and, consequently, is not an agricultural product. Indeed, the CBD was extracted from the Cannabis sativa plant in its entirety by the process of carbon dioxide (CO2) extraction, so it differs from the types of Cannabis sativa mentioned under the heading above. To corroborate this finding, the CJEU also remarked that the CBD at issue in the main proceedings falls under the definition provided in a different section of the HS Convention, which is not mentioned in Annex I.

Therefore, the CJEU states that Regulations (EU) No. 1307/2013 and No. 1308/2013 do not apply to the case at issue.

3. On the applicability of Articles 34 and 36 of the TFEU

Preliminarily, the CJEU clarified that in all Member States there are prohibitions on marketing narcotic drugs, including those derived from hemp, with specific exceptions concerning their controlled trade for use for medical and scientific purposes. Consequently, narcotic drugs not distributed under such specific channels are subject to general prohibitions by national legislations and cannot rely on freedoms of movement or the principle of non-discrimination.[3]

In light of the above, the CJEU established that it would investigate first whether CBD is a narcotic drug and second when freedoms of movement can be lawfully limited.

A. CBD is not a narcotic drug, therefore freedoms of movement apply

To determine whether the CBD at issue in the main proceedings constitutes a narcotic drug, the CJEU took into account Framework Decision 2004/757 laying out minimum provisions on the constituent elements of criminal acts and penalties in the field of illicit drug trafficking. Article 1 of that decision defines “drugs” by referring to (i) the Convention on Psychotropic Substances concluded in Vienna on February 21, 1971; (ii) Joint Action 97/396/JHA of June 16, 1997; and (iii) the Single Convention.

While the documents in points (i) and (ii) do not cover CBD, the Single Convention includes cannabis, cannabis resin, and cannabis extracts and tinctures under its definition of a “drug” (see Schedule I). In addition, the Single Convention defines the terms “cannabis” and “cannabis plant” as “the flowering or fruiting tops of the cannabis plant (excluding the seeds and leaves when not accompanied by the tops) from which the resin has not been extracted, by whatever name they may be designated,” and as “any plant of the genus Cannabis,” respectively (see Article 1.1.b and c).

A literal interpretation of the definitions above might lead to considering CBD a cannabis extract, and therefore a “drug” under the Single Convention. Nevertheless, the CJEU took into account the commentary on the Single Convention published by the United Nations, which states that, with regard to the purpose and general spirit of that Convention, the definition of “cannabis” is “intrinsically linked to the state of scientific knowledge in terms of the harmfulness of cannabis-derived products to human health.[4] Indeed, the Single Convention rationale is, inter alia, to protect the health and welfare of mankind.

In light of the above, the CJEU holds that it would be contrary to the purpose and general spirit of the Single Convention to include the CBD at issue under the “drug” definition, since, according to the elements in the file before the Court itself, CBD does not appear to have any psychotropic effect or any harmful effect on human health on the basis of available scientific data. For instance, generally speaking, the referring court notes that in a 2017 report the World Health Organization recommended removing CBD from the list of doping substances. Furthermore, specific to the proceedings at issue, the expert appointed in connection with the criminal inquiry concluded that the CBD had “little or no” effect on the central nervous system. In addition, the cannabis variety from which the CBD at issue was extracted had THC content of 0.2% or less.

Therefore, given that the CBD at issue is not a narcotic drug, freedoms of movement apply to it, and the CJEU moved on to investigating when restrictions on such freedoms may be considered legitimate.

B. When prohibitions on marketing CBD are legally justified

According to Article 36 of the TFEU, prohibitions or restrictions on imports, exports, or goods in transit can be justified on one of the grounds of public interest expressly mentioned in the same. This provision has been interpreted by case-law, which clarified that the prohibition/restriction must be appropriate to securing attainment of the objective pursued, meaning that it genuinely reflects concern for reaching that goal in a consistent and systematic manner,[5] and it must not go beyond what is necessary in order to do so.[6]

In applying these principles, the CJEU holds that the national authorities that invoke the grounds of public health protection as the basis for a prohibition on marketing CBD must demonstrate that the measure is actually necessary and proportionate on the basis of scientific data, meaning that the real risk to public health cannot be based on purely hypothetical considerations.

In particular, although it is up to the referring court to analyze the restrictive measure set forth by the French provisions, the CJEU questions their appropriateness since the prohibition does not apply to the marketing of synthetic CBD that has the same properties as the prohibited CBD.

4. National perspective: Potential impact of the CJEU ruling on Italian provisions on CBD

At the moment, in Italy the Law of December 2, 2016, No. 242 (“Law 242/2016”) allows the cultivation of selected Cannabis Sativa plants[7] and the marketing of a specific list of derived products (see Articles 1 and 2) that do not fall under the scope of the Decree of the President of the Republic of September 9, 1990 No. 309 governing narcotic drugs and psychotropic substances and prevention, treatment, and rehabilitation of drug addiction (“DPR 309/90”).

DPR 309/90 provides a strict regime for the substances to which it applies, including, for example, the need for specific authorizations for their production, the obligation to have a medical prescription for their use, quantitative limits set by the Ministry of Health, and so on.

Against this backdrop, a recent decree issued by the Ministry of Health on October 1, 2020 (“Decree”) amended DPR 309/90, including “cannabidiol compositions for oral administration obtained from Cannabis extracts” in Section B of the Table of Medicinal Products (Annex 4 of the DPR 309/90).

According to Article 14.1.f of the Decree, the CBD is included in Section B of the Table of Medicinal Products due to the fact that it is “a drug containing substances of current therapeutic use for which it has been ascertained that there is a real danger of induction of physical or mental dependence of intensity and gravity lower than those produced by the drugs listed in section A” (see Article 14.1.f).

This statement appears to contradict the judgment of the CJEU, which clearly stated that the CBD should not be considered a narcotic drug, as detailed above. In particular, according to the reasoning of the CJEU, the Italian legislature would need to substantiate both the public health interest protected by means of such limitation (i.e., including that specific kind of CBD in the Table of Medicinal Products, entailing the fulfillment of all the related requirements) and the appropriateness and proportionality of the latter, pursuant to Article 36 of the TFEU.

The entry into force of the Decree has been suspended by a decree of the Ministry of Health dated October 28, 2020, pending the opinions of the Italian Higher Institute of Health (Istituto Superiore di Sanità) and the National Health Council (Consiglio Superiore di Sanità). The judgement issued by the CJEU in this case could have an impact on how such entities assess the actual need for and proportionality of such limiting measures for CBD.

[1] Regulation (EU) No. 1307/2013 of the European Parliament and of the Council of December 17, 2013 establishing rules for direct payments to farmers under support schemes within the framework of the common agricultural policy and repealing Council Regulation (EC) No. 637/2008 and Council Regulation (EC) No. 73/2009; and Regulation (EU) No. 1308/2013 of the European Parliament and of the Council of December 17, 2013 establishing a common organization of the markets in agricultural products and repealing Council Regulations (EEC) No. 922/72, (EEC) No. 234/79, (EC) No. 1037/2001, and (EC) No. 1234/2007.

[2] This was concluded in Brussels on June 14, 1983 and approved, with its amending protocol of June 24, 1986, on behalf of the European Economic Community by Council Decision 87/369/EEC of April 7, 1987.

[3] The CJEU set the judgment of December 16, 2010, Josemans, C‑137/09, as the benchmark in such cases.

[4] Paragraph 74.

[5] See CJEU judgment of December 23, 2015, Scotch Whisky Association and Others, C‑333/14.

[6] See CJEU judgment of June 18, 2019, Austria v Germany, C‑591/17.

[7] As identified in Article 1 of Law 242/2016.

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