Legal Framework of the cannabis industry in Germany

Por 5 febrero, 2024 No Comments

As a follow-up to our recent article on the Argentinean framework for medicinal and industrial cannabis, we wanted to share some compared legislation with our readers and check how such a framework is evolving in other countries. In this case, we consulted with Marcus Dury, partner at Dury Legal, one of the member firms of Alliott Global Alliance in Germany. Here are his insights.

The German Cannabis Act 2024 – Current developments
Decriminalization of cannabis is taking up speed in Germany.
Since December 2021, Germany has been governed by a center-left coalition of three parties, which is called the «traffic light government» due to the parties’ identifying colors red, yellow and green. As part of the coalition negotiations, the three parties in the traffic light government agreed to legalize cannabis consumption in Germany and establish a state-controlled distribution system.
However, this will not happen for the time being. After long negotiations and considerable headwinds from various associations and the fear of a veto from the EU Commission or the European Court of Justice, the coalition government agreed in 2023 to refrain from complete legalization.
Instead, comprehensive decriminalization is the aim without creating incentives for organized crime. The production of cannabis and the distribution systems are to be regulated in order to avoid undesirable developments such as those that have occurred in the Netherlands since the 1970s due to the toleration of cannabis use. In the Netherlands, cannabis production is firmly in the hands of the mafia. There is a complete lack of legal regulation on the use of cannabis. Consumption is largely tolerated there, as is the sale in so-called «coffee shops». In the Netherlands, 100% of the cannabis products on offer come from illegal grows or illegal imports.
The German Cannabis Act, one of the most controversial projects of the traffic light government, aims to avoid these mistakes as well as a veto by the EU. If the legislative process goes as planned, it will come into force on April 1, 2024.
The main aim of the planned decriminalization in Germany is to strengthen the protection of minors, weaken organized crime and relieve the burden on the police and judiciary. Every year, around 100,000 criminal proceedings relating to the possession and consumption of cannabis are opened in Germany. However, the majority of these proceedings are then immediately dismissed on the grounds of insignificance, sometimes against conditions.
Another aim of the German Cannabis Act is to make the consumption of cannabis safer. As there are no youth protection and health protection regulations on the black market, structures are to be created to increase the quality and purity of cannabis products. Extenders or unsafe admixtures of more dangerous and addictive substances, as in black market products, should no longer be an issue.
It is assumed that around 5 million people in Germany regularly consume cannabis products. The possession and trade of cannabis is currently absolutely prohibited in Germany. Cannabis is not legally classified as a stimulant, but as a narcotic, on a par with cocaine or heroin. The background to this is the relevant UN conventions.
The focus of the German Cannabis Act is on decriminalizing the possession of up to 25 grams of cannabis per person. The 25 gram limit also applies when you are out in public or carrying cannabis in your car. At home, you are allowed to store up to 50 grams of dry weight cannabis per adult in the household. In addition, you may grow up to three female flowering plants in your own home for the purpose of personal consumption, and grow several seedlings/growing plants.
Another important element of the Cannabis Act is community cultivation for people aged 18 and over – under certain conditions – in so-called cannabis clubs. The clubs are controlled by certain authorities in the municipalities in order to ensure the protection of young people and health and to combat the black market. The cannabis clubs may only supply cannabis products to their own members free of charge up to a quantity of 25 grams per month. Members pay a fixed monthly membership fee and in return receive a right to receive a share of the harvest (up to 25 gram per month). The sale of cannabis to club members is prohibited as well as the sale to others. All transactions must be documented. You should only be allowed to be a member of one club and each club should have a maximum of 500 members. The cultivation clubs must be physically secured separately and must adhere to detailed compliance structures. Consumption within the clubs will be prohibited.
Further provisions of the Cannabis Act concern bans on consumption in the vicinity of schools and other youth protection facilities, such as kindergartens. Penalties for exceeding the legal regulations will in future be treated as an administrative offense instead of a criminal offense. Higher penalties for the protection of minors will be introduced. Investigative powers for criminal prosecution will be extended.
The issue of road safety will also be addressed as part of the legislative process. Until now, very strict THC limits for driving have applied in Germany, meaning that the withdrawal of a driver’s license was the rule if a driver had consumed a small amount of cannabis the night before. The economic consequences for those affected were often considerable. As part of the legislative process, the Federal Ministry of Transport has formed a new expert commission, which has spoken out in favor of raising the THC limits so that far fewer driving license revocation proceedings can be expected. It is therefore expected that driving license revocation will no longer be a form of alternative punishment in the future.
The law provides for a staggered entry into force: decriminalization will come into force from 1 April 2024 and the regulations on cultivation associations (cannabis clubs) will take effect from 1 July 2024. This slimmed-down decriminalization law is also known as the «Pillar 1 law».
A further law to legalize the distribution of cannabis within the framework of state-supervised dispensaries and cannabis stores (so-called «Pillar 2 law») is planned, but is still pending. However, these cannabis dispensaries are also to be limited to test regions in Pillar 2 for the time being and their effect is to be scientifically evaluated. It is questionable whether it will still be possible to pass a corresponding Pillar 2 law during this legislative period – i.e. by around November 2025 – as the previous cannabis law (Pillar 1 law) has already led to considerable disputes within the government.
A complete legalization of recreational cannabis, including the commercialization of the production and distribution process, is therefore unlikely in Germany in the next 5 years.
The current Pillar 1 decriminalization law does not open up any commercial opportunities for investors. On the contrary the German government does not aim to create any incentives for investment in the German cannabis market, at least in the Pillar-1-Law.
Besides the Pillar-1-Law for recreational cannabis the market for medical cannabis is expected to grow in the future as the prerequisites for doctors to subscribe medical cannabis will be lowered in the near future, too. Requirements for approval from the respective health insurance company shall be abolished for many diagnoses.
The market for medical cannabis is therefore likely to be far more attractive to investors than the market for recreational cannabis.
04.02.2024 – Marcus Dury LL.M. – DURY LEGAL