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The Assignment of Commercial Contracts in Legal Practice

Contracts are a prime example of intangible property. Parties to commercial contracts, like other property owners, frequently want to transfer their property to a third party. The transfer of a contract refers to the assignment of some or all of a party’s rights or the delegation of some or all of a party’s performance, or both, to a non-party to the agreement.

Some common instances in which a contracting party in a commercial context may desire to assign contractual rights, performance responsibilities, or both are as follows:

  • In an asset sale, a corporation sells parts or all of its company.
  • A contractor who subcontracts its work under certain projects.
  • A business conglomerate that is going through an internal corporate reorganization.
  • The borrower who offers its lender a security interest in its assets.
  • A manufacturer who sells its receivables to a third party.

In any of these cases, the non-transferring party may object to assignment or delegation for a variety of grounds, including:

  • The desire to choose the party with whom it does business.
  • Concern that a different obligor or obligee may jeopardize the non-transferring party’s capacity to benefit from the contractual deal

To decide whether the transferring party (also known as the transferor) can execute the proposed transfer without gaining the non-transferring party’s approval, the transferring party must turn to relevant legislation and the plain text of the contract. If consent is necessary and not obtained, the transferring party faces the following risks:

  • Violation of the contract.
  • Making an ineffective and invalid transfer.

The Definitions of Assignment and Delegation

Each party to a contract is an:

  • Obligee in terms of its contractual rights; and
  • Obligor in terms of its contractual performance responsibilities.

Contract “assignability” is a term frequently used by contracting parties and practitioners. While they may expressly address the assignment of a party’s rights under the contract in some contexts, they frequently use the term “assignment” to refer to both:

  • The delegation of duty to perform.
  • The assignment of rights to obtain performance.

However, assignment and delegation are two distinct legal concepts that must be treated individually due to the fact that they might have different outcomes.

What is an Assignment?

Assignment is the transfer of some or all of an obligee’s (assignor’s) rights to receive performance under a contract, generally but not always to a non-party (assignee). A contract benefit is a right (a chose in action) that, in theory, may be delegated by the benefiting party to a non-party. For clarity purposes, this informative piece will assume that the assignee is a non-party, although the rights and responsibilities of the parties addressed apply equally to an assignee who is also a party to the agreement. When these rights are assigned, the assignor no longer has any claim to the advantages of the given rights, which are completely passed to the assignee.

Technically, a contract’s burden cannot be assigned under the law (see National Trust Co. v. Mead [i] and Irving Oil Ltd. v. Canada [ii] ). Transferring performance responsibilities under a contract requires the approval of all parties, making such a transfer a novation.

In practice, parties frequently refer to “assigning a contract” or “allowing the assignment of a contract,” which is actually an inaccurate representation of their intentions. For example, the parties may plan for some or all of the following:

  • The contract’s rights or benefits may be assigned.
  • The contract’s burdens or performance duties may be transferred.
  • Rights and burdens may be transferred.

The Effects of Assignment

The assignor is no longer entitled to any benefits from the assigned rights, which have all been passed to the assignee; nonetheless, even if the assignor is stripped of its contractual rights, assignment does not decrease or remove the assignor’s duties to the non-assigning party. As previously stated, a contract’s burden may only be assigned to a third party with the approval of all parties. As a result, the assignor is still obligated to fulfill its contractual commitments. The non-assigning party retains the following:

  • Its entitlement to get performance from the assignor; and
  • Its remedies against the assignor in the event of non-performance.

The ordinary rule is that a party can only assign its benefits without the consent of the other party to the contract and will remain liable to the other party for its performance obligations (see National Trust Co. v. Mead [iii] and Rodaro v. Royal Bank [iv] ). If the assignor intends to transfer its obligations and both the non-transferring party and the potential assignee agree, the parties should enter into a novation agreement, which results in a new contract between the assignee and the old contract’s remaining (non-transferring) party. In practice, the assignee often undertakes the contract’s performance responsibilities as of the date of assignment, and the assignor gets an indemnity from the assignee in the event of a breach or failure to perform.

A clear, present, purpose to transfer the assigned rights without needing any additional action by the assignee is required for an assignment to be effective, which means that a promise to assign in the future is ineffective as an actual transfer. Otherwise, no special terminology is necessary to draft an effective assignment.

What is Delegation?

Delegation is the transfer of some or all of an obligor’s (delegating party’s) performance responsibilities (or conditions demanding performance) under a contract to a non-party (delegatee). To be effective, a delegation requires the delegatee to agree to take on the delegated performance; however, unless the non-delegating party has consented to a novation, the delegating party remains accountable for the delegated performance, whether or not it has also transferred its contractual rights.

This is distinct from an assignment of rights, in which the assignor relinquishes its contractual claims upon assignment. As a result, even if the delegating party can effectively delegate its actual performance to the delegatee (such that the delegatee’s actual performance discharges the delegating party’s duty), the delegating party cannot be relieved of its obligation to perform and liability for non-performance unless the non-delegating party agrees to a novation.

There is no precise wording necessary to create an effective delegation, just as there is not for the assignment of rights. When performance is effectively delegated, the delegatee assumes liability for the delegating party’s performance obligations (under an assumption agreement), even if the delegating party retains liability to the non-delegating party for the delegatee’s failure to adequately perform the delegated obligations in the absence of a novation. Under an assumed agreement, the delegating party may have recourse against the delegatee, which is frequently addressed through a contractual indemnity right.

If the delegating party wishes to entirely exclude itself from liability for non-performance, it must get the non-delegating party’s approval to the contract (novation). In the majority of novations, the delegating party, the delegatee, and the non-delegating party all agree on the following:

  • The delegatee replaces the delegating party as a party to the contract.
  • The delegating party is no longer liable for contract performance.
  • The delegatee is directly and solely liable for the delegating party’s contract fulfillment.

Types of Assignment – Legal (Statutory) Assignment vs. Equitable Assignment

  • Legal (Statutory) Assignment: An assignment that satisfies the provisions of the appropriate province or territory laws (for example, the Conveyancing and Law of Property Act [v] )
  • Equitable Assignment: An equitable assignment may be enforced even if it does not fulfill the statutory requirements for a legal assignment.

Requirements for a Legal (Statutory) Assignment

All of Canada’s common law provinces have enacted legislation allowing the transfer of contract rights. Notably, the legislation for Ontario is the Conveyancing and Law of Property Act .

These statutory assignments are enforceable if the parties comply with the following procedures:

  • The assignment is absolute.
  • The assignment is in writing, signed by the assignor
  • the non-assigning obligor is given express written notice.

A statutory assignment does not need consideration, and no precise words or form are necessary. They can be made as gifts and be valid.

Requirements for an Equitable Assignment

An assignment may be enforceable as an equitable assignment even if it does not fulfill the formality criteria of a statutory assignment. An equitable assignment does not necessitate the use of any specific terms or form. However, in order to comply with any provincial statutes of frauds regulations, the assignment must be in writing. The phrasing must clearly indicate that the assignee is to benefit from the rights being assigned. In contrast to a statutory assignment, consideration is required until there is a full transfer, such as a gift. It is not necessary to provide the non-assigning obligor with express written notification (except in the case of a transfer of land). However, notification is often given largely to assure that:

  • The obligor ceases to pay the assignor.
  • The assignee has priority over subsequent encumbrances.

Contractual Anti-Assignment & Anti-Delegation Clauses

Rather than relying on relatively uncertain legal rules, most commercial contract parties handle transferability issues in the written agreement. As a result, most commercial contracts include a negative covenant that restricts one or both parties’ rights to assign.

These clauses frequently include specific exceptions that allow one or more of the parties to assign and delegate rights and duties, often to designated non-parties such as affiliates and successors-in-interest to the transferring party’s business.

Courts frequently uphold provisions that prevent assignment because they favor the rights of parties to freely contract. However, subject to specific limitations, there is a broad assumption that contractual rights are assignable. As a result, the case law on anti-assignment provisions is a little erratic. Some courts have upheld anti-assignment clauses and declared the agreement unenforceable. Others have argued that an anti-assignment provision cannot preclude assignment.

Overall, contractual anti-assignment and anti-delegation provisions are commonly included in many types of business contracts. If not, transferability is determined by the contract’s subject matter and the nature of the rights and obligations to be transferred. It is important to stay knowledgeable the existence of such contractual terms when dealing with various commercial contracts…such as contracts for the sale of goods, personal service contracts, commercial real estate leases and various other types of contracts.

If you have any questions about your business’s contractual assignment or delegation needs, contact Cactus Law today to speak with a lawyer specializing in commercial law.

Disclaimer:

The information presented above is solely for general educational and informational purposes. It is not intended to be, and should not be taken as, legal advice. The information given above may not be applicable in all cases and may not even reflect the most recent authority after the date of its publication. As a result, please refer to all updated legislation, statutes, and amendments. Nothing in this article should be relied on or acted upon without the benefit of legal advice based on the specific facts and circumstances described, and nothing in this article should be interpreted otherwise.

About the Author:

Kanwar Gujral is entering his third year at Osgoode Hall Law School in Toronto, Ontario. He has a dedicated interest in real estate, business, and corporate law.

[i] National Trust Co. v. Mead , 1990 CarswellSask 165 (S.C.C.).

[ii] Irving Oil Ltd. v. Canada , 1984 CarswellNat 137 (Fed. C.A.).

[iii] Supra note 1.

[iv] Rodaro v. Royal Bank , 2002 CarswellOnt 1047 (Ont. C.A.).

[v] Conveyancing and Law of Property Act , R.S.O. 1990, c. C.34.

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Assignments and Preferences Act, R.S.O. 1990, c. A.33

Assignments and Preferences Act

R.S.O. 1990, CHAPTER A.33

Consolidation Period: From March 1, 2022 to the e-Laws currency date .

Last amendment: 2021, c. 4, Sched. 3, s. 19 .

Legislative History: 1993, c. 27, Sched.; 2001, c. 9, Sched. D, s. 14 ; 2007, c. 7, Sched. 7, s. 180 ; 2010, c. 16, Sched. 4, s. 23 ; 2020, c. 11, Sched. 5, s. 13 ; 2020, c. 36, Sched. 7, s. 294 ; 2021, c. 4, Sched. 3, s. 19 .

1 In this Act,

“judges” means a judge of the Superior Court of Justice.  R.S.O. 1990, c. A.33, s. 1; 2001, c. 9, Sched. D, s. 14.

Section Amendments with date in force (d/m/y)

2001, c. 9, Sched. D, s. 14 - 29/06/2001

If judge disqualified

2 If a judge is disqualified to act in a matter under this Act, another judge may do so.  R.S.O. 1990, c. A.33, s. 2.

Nullity of certain confessions of judgment, etc.

3 Every confession of judgment, cognovit actionem or warrant of attorney to confess judgment given by a person, being at the time in insolvent circumstances or unable to pay his, her or its debts in full or knowing himself, herself or itself to be on the eve of insolvency, voluntarily or by collusion with a creditor with intent thereby to defeat, hinder, delay or prejudice creditors wholly or in part, or to give one or more creditors a preference over other creditors or over any one or more of them, is void as against the creditors of the person giving the same and is ineffectual to support any judgment or execution.  R.S.O. 1990, c. A.33, s. 3.

Nullity of gifts, transfers, etc., made with intent to defeat or prejudice creditors

4 (1) Subject to section 5, every gift, conveyance, assignment or transfer, delivery over or payment of goods, chattels or effects, or of bills, bonds, notes or securities, or of shares, dividends, premiums or bonus in any bank, company or corporation, or of any other property, real or personal, made by a person when insolvent or unable to pay the person’s debts in full or when the person knows that he, she or it is on the eve of insolvency, with intent to defeat, hinder, delay or prejudice creditors, or any one or more of them, is void as against the creditor or creditors injured, delayed or prejudiced.  R.S.O. 1990, c. A.33, s. 4 (1).

Unjust preferences

(2) Subject to section 5, every such gift, conveyance, assignment or transfer, delivery over or payment made by a person being at the time in insolvent circumstances, or unable to pay his, her or its debts in full, or knowing himself, herself or itself to be on the eve of insolvency, to or for a creditor with the intent to give such creditor an unjust preference over other creditors or over any one or more of them is void as against the creditor or creditors injured, delayed, prejudiced or postponed.  R.S.O. 1990, c. A.33, s. 4 (2).

When there is presumption of intention if transaction has effect of unjust preference

(3) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, in and with respect to any action or proceeding that, within sixty days thereafter, is brought, had or taken to impeach or set aside such transaction, be presumed, in the absence of evidence to the contrary, to have been made with the intent mentioned in subsection (2), and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure.  R.S.O. 1990, c. A.33, s. 4 (3).

(4) Subject to section 5, if such a transaction with or for a creditor has the effect of giving that creditor a preference over the other creditors of the debtor or over any one or more of them, it shall, if the debtor within sixty days after the transaction makes an assignment for the benefit of the creditors, be presumed, in the absence of evidence to the contrary, to have been made with the intent mentioned in subsection (2), and to be an unjust preference within the meaning of this Act whether it be made voluntarily or under pressure.  R.S.O. 1990, c. A.33, s. 4 (4); 1993, c. 27, Sched.

“Creditor” for certain purposes to include surety and endorser

(5) The word “creditor” when used in the singular in subsections (2), (3) and (4) includes any surety and the endorser of any promissory note or bill of exchange who would upon paying the debt, promissory note or bill of exchange, in respect of which the suretyship was entered into or the endorsement was given, become a creditor of the person giving the preference within the meaning of those subsections.  R.S.O. 1990, c. A.33, s. 4 (5).

1993, c. 27, Sched. - 31/12/1991

Assignments for benefit of creditors and good faith sales, etc., protected

5 (1) Nothing in section 4 applies to an assignment made to the sheriff for the area in which the debtor resides or carries on business or, with the consent of a majority of the creditors having claims of $100 and upwards computed according to section 24, to another assignee resident in Ontario, for the purpose of paying rateably and proportionately and without preference or priority all the creditors of the debtor their just debts, nor to any sale or payment made in good faith in the ordinary course of trade or calling to an innocent purchaser or person, nor to any payment of money to a creditor, nor to any conveyance, assignment, transfer or delivery over of any goods or property of any kind, that is made in good faith in consideration of a present actual payment in money, or by way of security for a present actual advance of money, or that is made in consideration of a present actual sale or delivery of goods or other property where the money paid or the goods or other property sold or delivered bear a fair and reasonable relative value to the consideration therefor.  R.S.O. 1990, c. A.33, s. 5 (1).

Transfer to creditor of consideration for sale invalid

(2) In case of a valid sale of goods or other property and payment or transfer of the consideration or part thereof by the purchaser to a creditor of the vendor under circumstances that would render void such a payment or transfer by the debtor personally and directly, the payment or transfer, even though valid as respects the purchaser, is void as respects the creditor to whom it is made.  R.S.O. 1990, c. A.33, s. 5 (2).

Effect of assignment not in accordance with Act

(3) Every assignment for the general benefit of creditors that is not void under section 4, but is not made to the sheriff nor to any other person with the prescribed consent of creditors, is void as against a subsequent assignment that is in conformity with this Act, and is subject in other respects to the provisions thereof until and unless a subsequent assignment is executed in accordance therewith.  R.S.O. 1990, c. A.33, s. 5 (3).

Security given up upon void payment to be returned

(4) Where a payment has been made that is void under this Act and any valuable security was given up in consideration of the payment, the creditor is entitled to have the security restored or its value made good to him before, or as a condition of, the return of the payment.  R.S.O. 1990, c. A.33, s. 5 (4).

Exceptions:

(5) Nothing in this Act,

(a)  affects the Wages Act or prevents a debtor providing for payment of wages due by him or her in accordance with that Act;

surrender of securities

(b)  affects any payment of money to a creditor where the creditor, by reason or on account of the payment, has lost or been deprived of, or has in good faith given up, any valid security held for the payment of the debt so paid unless the security is restored or its value made good to the creditor;

exchange of securities

(c)  applies to the substitution in good faith of one security for another security for the same debt so far as the debtor’s estate is not thereby lessened in value to the other creditors; or

certain securities to be valid

(d)  invalidates a security given to a creditor for a pre-existing debt where, by reason or on account of the giving of the security, an advance in money is made to the debtor by the creditor in the belief that the advance will enable the debtor to continue the debtor’s trade or business and to pay the debts in full.  R.S.O. 1990, c. A.33, s. 5 (5).

Residence of assignee

6 No person, other than a permanent resident of Ontario, shall be assignee under an assignment within this Act, nor shall any assignee delegate the duties as assignee to or appoint as deputy any person who is not a permanent resident of Ontario, and no charge shall be made or recoverable against the assignor or his estate for any services or other expenses of any such assignee, deputy or delegate of any assignee who is not a permanent resident of Ontario.  R.S.O. 1990, c. A.33, s. 6.

Form of assignment for general benefit of creditors

7 Every assignment made under this Act for the general benefit of creditors, if the property is described in the words “all my personal property that may be seized and sold under execution and all my real estate, credits and effects”, or in words to the like effect, vests in the assignee all the real and personal estate, rights, property, credits and effects, whether vested or contingent, belonging to the assignor at the time of the assignment, except such as are by law exempt from seizure or sale under execution, subject, however, as regards land, to the Registry Act and the Land Titles Act .  R.S.O. 1990, c. A.33, s. 7.

All assignments for general benefit of creditors to be subject to this Act

8 Every assignment for the general benefit of creditors, whether it is or is not expressed to be made under or in pursuance of this Act and whether the assignment does or does not include all the real and personal estate of the assignor, vests the estate, whether real or personal or partly real and partly personal, thereby assigned in the assignee therein named for the general benefit of creditors, and the assignment and the property thereby assigned is subject to all the provisions of this Act, and the same applies to the assignee named in the assignment.  R.S.O. 1990, c. A.33, s. 8.

How claims are to rank where different estates

9 If an assignor executing an assignment under this Act for the general benefit of creditors owes debts both individually and as a member of a partnership or as a member of different partnerships, the claims rank first upon the estate by which the debts they represent were contracted and only rank upon the other or others after all the creditors of such other estate or estates have been paid in full.  R.S.O. 1990, c. A.33, s. 9.

Appointment of substituted assignee

10 (1) A majority in number and value of the creditors who have proved claims to the amount of $100 or upwards may substitute for the sheriff, or for an assignee under an assignment to which subsection 5 (3) applies, a person residing in the area in which the assignor resided or carried on business at the time of the assignment.  R.S.O. 1990, c. A.33, s. 10 (1).

Removal, substitution or addition

(2) An assignee may be removed and another substituted or an additional assignee appointed by the judge.  R.S.O. 1990, c. A.33, s. 10 (2).

Death of assignee

(3) Where an assignee dies, a new assignee may be appointed in the manner provided by subsection (2).  R.S.O. 1990, c. A.33, s. 10 (3).

Effect on estate

(4) Where a new or additional assignee is appointed, the estate vests in the new or additional assignee alone or jointly with the co-assignee without a conveyance or transfer, and the new or additional assignee shall register a verified copy of the resolution of the creditors or of the order of appointment in the office in which the assignment was registered.  R.S.O. 1990, c. A.33, s. 10 (4).

Registration

(5) A verified copy of the resolution or of the order may be registered in the proper land registry office and the registration thereof has the same effect as the registration of a conveyance.  R.S.O. 1990, c. A.33, s. 10 (5).

Rights of assignee

11 (1) Except as otherwise provided in this section, the assignee has the exclusive right of suing for the rescission of agreements, deeds and instruments or other transactions made or entered into in fraud of creditors or in violation of this Act.  R.S.O. 1990, c. A.33, s. 11 (1).

Right of creditor in certain cases if assignee refuses

(2) Where a creditor desires to cause any proceeding to be taken that, in the creditor’s opinion, would be for the benefit of the estate and the assignee under the authority of the creditors or inspectors refuses or neglects to take such proceeding after being required so to do, the creditor has the right to obtain an order of the judge authorizing the creditor to take the proceeding in the name of the assignee, but at the creditor’s own expense and risk, upon such terms and conditions as to indemnity to the assignee as the judge prescribes, and thereupon any benefit derived from the proceeding, to the extent of the claim and full costs, belongs exclusively to the creditor instituting the proceeding for his, her or its benefit, but, if before such order is obtained the assignee signifies to the judge a readiness to institute the proceeding for the benefit of the creditors, the order shall prescribe the time within which to do so, and in that case the advantage derived from the proceeding, if instituted within such time, belongs to the estate.  R.S.O. 1990, c. A.33, s. 11 (2).

Following proceeds of property fraudulently transferred

12 (1) In the case of a gift, conveyance, assignment or transfer of any property, real or personal, that is invalid against creditors, if the person to whom the gift, conveyance, assignment or transfer was made has sold or disposed of, realized or collected the property or any part thereof, the money or other proceeds may be seized or recovered in an action by a person who would be entitled to seize and recover the property if it had remained in the possession or control of the debtor or of the person to whom the gift, conveyance, transfer, delivery or payment was made, and such right to seize and recover belongs not only to an assignee for the general benefit of the creditors of the debtor but, where there is no such assignment, to all creditors of the debtor.  R.S.O. 1990, c. A.33, s. 12 (1).

Taking proceeds under execution

(2) Where there is no assignment for the benefit of creditors and the proceeds are of such a character as to be seizable under execution, they may be seized under the execution of any creditor and are subject to the Creditors’ Relief Act, 2010 .  R.S.O. 1990, c. A.33, s. 12 (2); 2010, c. 16, Sched. 4, s. 23 (1).

Creditor suing on behalf of the creditor and other creditors

(3) Where there is no assignment for the benefit of creditors and whether the proceeds are or are not of such a character as to be seizable under execution, an action may be brought therefor by a creditor, whether an execution creditor or not, on behalf of the creditor and all other creditors, or such other proceedings may be taken as are necessary to render the proceeds available for the general benefit of the creditors.  R.S.O. 1990, c. A.33, s. 12 (3).

Protection of innocent purchasers

(4) This section does not apply as against innocent purchasers of the property.  R.S.O. 1990, c. A.33, s. 12 (4).

2010, c. 16, Sched. 4, s. 23 (1) - 25/10/2010

Assignments take precedence over attachments, etc.

13 An assignment for the general benefit of creditors under this Act takes precedence over attachments, garnishee orders, judgments, executions not completely executed by payment, and orders appointing receivers by way of equitable execution subject to the lien, if any, of an execution creditor for costs where there is but one execution in the sheriff’s hands or to the lien, if any, for the costs of the creditor who has the first execution in the sheriff’s hands.  R.S.O. 1990, c. A.33, s. 13.

Waiver of claims by Crown

14 Where the Crown has a claim in respect of estreated bail against the estate of a person who makes an assignment for the benefit of creditors, the Lieutenant Governor in Council may waive any preference in respect of the claim that the Crown has against the estate by virtue of its prerogative right.  R.S.O. 1990, c. A.33, s. 14.

Amendment by judge

15 No advantage shall be obtained by any creditor by reason of any mistake, defect or imperfection in an assignment under this Act for the general benefit of creditors if the assignment can be amended or corrected, and any such mistake, defect or imperfection shall be amended by the judge on the application of the assignee or of any creditor of the assignor, and on such notice to other parties concerned as the judge thinks reasonable, and the amendment, when made, shall be related back to the date of the assignment, but not so as to prejudice the rights of innocent purchasers.  R.S.O. 1990, c. A.33, s. 15.

Publishing notice of assignment

16 (1) A notice of the assignment shall, forthwith after the delivery thereof to the assignee or assent thereto by the assignee, be published by the assignee at least once in The Ontario Gazette and not less than twice in a newspaper having a general circulation in the area in which the property assigned is situate.  R.S.O. 1990, c. A.33, s. 16 (1).

Registering assignment

(2) The assignment or a copy thereof shall also, within five days from the execution thereof, be registered by the assignee, together with an affidavit of a witness thereto of the due execution of the assignment, in the office of the local registrar of the Superior Court of Justice for the area in which the assignor, if a resident in Ontario, resided at the time of the execution thereof, or if not a resident then in the office of the local registrar of the Superior Court of Justice for the area in which the personal property so assigned or where the principal part thereof is at the time of the execution of the assignment, and the local registrar shall number and enter the assignments and endorse thereon the time of receiving them, and they shall be open for the inspection of all persons desiring to inspect them.  R.S.O. 1990, c. A.33, s. 16 (2); 2001, c. 9, Sched. D, s. 14.

Fees of clerk

(3) The local registrar is entitled to the same fees for services as if the assignment had been registered under the Personal Property Security Act .  R.S.O. 1990, c. A.33, s. 16 (3).

Penalty for neglecting publication or registration

17 (1) If the notice is not published as provided by section 16 or if the assignment is not registered within five days from the delivery thereof to the assignee or assent thereto by the assignee, the assignee is liable to a penalty of $10 for each day during which the default continues.  R.S.O. 1990, c. A.33, s. 17 (1).

Onus of proof

(2) The burden of proving the time of the delivery or assent is upon the assignee.  R.S.O. 1990, c. A.33, s. 17 (2).

Liability of sheriff

(3) Where the assignment is made to a sheriff, the sheriff shall not incur the penalty unless he or she has been paid or tendered the cost of advertising and of registering the assignment, nor is the sheriff bound to act under the assignment until the costs in that behalf are paid or tendered to him or her.  R.S.O. 1990, c. A.33, s. 17 (3).

Compelling publication and registration

18 If the assignment is not registered or notice thereof is not published, the judge may, upon the application of any person interested in the assignment, by order enforce the registration of the assignment or the publication of the notice.  R.S.O. 1990, c. A.33, s. 18.

Omission to publish, etc.

19 The omission to publish or register as required by section 16 does not, nor does any irregularity in the publication of registration, invalidate the assignment.  R.S.O. 1990, c. A.33, s. 19.

Duty to call meeting of creditors

20 (1) It is the duty of the assignee immediately to become informed, by reference to the assignor and the assignor’s records of account, of the names and residences of the assignor’s creditors, and, within five days from the date of the assignment, to call a meeting of the creditors for the appointment of inspectors and the giving of directions with reference to the disposal of the estate by sending by registered mail to every creditor known to the assignee a notice calling the meeting to be held in the assignee’s office or some other convenient place to be named in the notice not later than twelve days after the mailing thereof, and by advertisement in The Ontario Gazette .  R.S.O. 1990, c. A.33, s. 20 (1).

Other meetings

(2) All other meetings to be held shall be called in like manner.  R.S.O. 1990, c. A.33, s. 20 (2).

Appointment of inspectors

21 (1) The creditors at any meeting may appoint one or more inspectors who shall superintend and direct the proceedings of the assignee in the management and winding up of the estate, and the creditors may also at any subsequent meeting for that purpose revoke the appointment of any inspector.  R.S.O. 1990, c. A.33, s. 21 (1).

Appointment of another inspector

(2) Where the appointment of an inspector is revoked or where an inspector dies, resigns from office or leaves Ontario, the creditors at any meeting may appoint another inspector to take the inspector’s place.  R.S.O. 1990, c. A.33, s. 21 (2).

Inspector not to purchase assets

(3) An inspector shall not directly or indirectly purchase any part of the stock in trade, debts or other assets of the assignor.  R.S.O. 1990, c. A.33, s. 21 (3).

Meeting of creditors by request of majority thereof

22 (1) In the case of a request in writing signed by a majority of the creditors having claims duly proved of $100 and upwards, computed according to section 24, it is the duty of the assignee, within two days after receiving the request, to call a meeting of the creditors for a day not later than twelve days after receiving the request, and in case of default the assignee shall incur a penalty of $25 for every day after the expiration of the time limited for calling the meeting until it is called.  R.S.O. 1990, c. A.33, s. 22 (1).

Power of judge

(2) In case a sufficient number of creditors do not attend the meeting mentioned in section 20 or fail to give directions with reference to the disposal of the estate, the judge may give such directions as he or she considers necessary for that purpose.  R.S.O. 1990, c. A.33, s. 22 (2).

Voting at meeting

23 At any meeting of creditors, the creditors may vote in person or by proxy authorized in writing, but no creditor whose vote is disputed is entitled to vote until after filing with the assignee an affidavit in proof of the claim, stating the amount and nature thereof.  R.S.O. 1990, c. A.33, s. 23.

Scale of votes

24 (1) Subject to section 10, all questions at meetings of creditors shall be decided by the majority of votes, and for such purpose the votes of creditors shall be calculated as follows:

1.  For every claim of or over $100 and not exceeding $200, one vote.

2.  For every claim over $200 and not exceeding $500, two votes.

3.  For every claim over $500 and not exceeding $1,000, three votes.

4.  For every additional $1,000 or fraction thereof, one vote.  R.S.O. 1990, c. A.33, s. 24 (1).

Upon claims acquired after assignment

(2) No person is entitled to vote on a claim acquired after the assignment unless the entire claim is acquired, but this does not apply to persons acquiring notes, bills or other securities upon which they are liable.  R.S.O. 1990, c. A.33, s. 24 (2).

Casting vote

(3) In the case of a tie, the assignee or, if there are two assignees, the assignee nominated for that purpose by the creditors or by the judge, if none has been nominated by the creditors, has a casting vote.  R.S.O. 1990, c. A.33, s. 24 (3).

Valuing securities

(4) Every creditor in the proof of claim shall state whether the creditor holds any security for the claim or any part thereof, and if such security is on the estate of the assignor or on the estate of a third person for whom the assignor is only secondarily liable, the creditor shall put a specified value thereon and the assignee, under the authority of the creditors, may either consent to the creditor ranking for the claim after deducting such valuation or may require from the creditor an assignment of the security at an advance of 10 per cent upon the specified value to be paid out of the estate as soon as the assignee has realized the security, and in such case the difference between the value at which the security is retained and the amount of the gross claim of the creditor is the amount for which the creditor shall rank and vote in respect of the estate.  R.S.O. 1990, c. A.33, s. 24 (4).

Right to revalue in certain cases

(5) If a creditor’s claim is based upon a negotiable instrument upon which the assignor is only indirectly or secondarily liable and that is not mature or exigible, the creditor shall be considered to hold security within the meaning of this section and shall put a value on the liability of the person primarily liable thereon as being the security for the payment thereof, but after the maturity of such liability and its non-payment the creditor is entitled to amend the claim and revalue the security.  R.S.O. 1990, c. A.33, s. 24 (5).

Where creditor holding security fails to value it

(6) Where a person claiming to be entitled to rank on the estate holds security for the claim, or any part thereof, of such a nature that the person is required by this Act to value the security and fails to value it, the judge, upon summary application by the assignee or by any other person interested in the estate, of which application at least three days notice shall be given to the claimant, may order that, unless a specified value be placed on the security and the assignee is notified in writing within a time to be limited by the order, the claimant is, in respect of the claim, or the part thereof for which the security is held in case the security is held for part only of the claim, wholly barred of any right to share in the proceeds of the estate.  R.S.O. 1990, c. A.33, s. 24 (6).

Consequences of neglect of order

(7) If a specified value is not placed on the security or the assignee is not notified in writing according to the exigency of the order or within such further time as the judge by subsequent order allows, the claim, or the part, as the case may be, is wholly barred as against the estate, but without prejudice to the liability of the assignor therefor.  R.S.O. 1990, c. A.33, s. 24 (7).

Proof of claim

25 (1) All persons claiming to be entitled to rank on the estate shall furnish to the assignee particulars of their claim proved by affidavit and such vouchers as the nature of the case admits.  R.S.O. 1990, c. A.33, s. 25 (1).

Limiting time for proof of claim

(2) Where a person claiming to be entitled to rank on the estate does not, within a reasonable time after receiving notice of the assignment and of the name and address of the assignee, furnish to the assignee satisfactory proofs of claim as provided by this and the preceding sections, the judge upon summary application by the assignee or by any other person interested in the estate, of which application at least three days notice shall be given to the claimant, may order that unless the claim is proved to the satisfaction of the judge within a time to be limited by the order, the claimant shall be deemed to be no longer a creditor of the estate and is wholly barred of any right to share in the proceeds thereof.  R.S.O. 1990, c. A.33, s. 25 (2).

Consequences of neglect to prove claim

(3) If the claim is not so proved within the time so limited or within such further time as the judge by subsequent order allows, it is wholly barred and the assignee is at liberty to distribute the proceeds of the estate as if no such claim existed, but without prejudice to the liability of the assignor therefor.  R.S.O. 1990, c. A.33, s. 25 (3).

Not to interfere with assignees

(4) Subsections (2) and (3) do not interfere with the protection afforded to assignees by section 53 of the Trustee Act .  R.S.O. 1990, c. A.33, s. 25 (4).

Creditor may prove claim not due

(5) A person whose claim has not accrued due is nevertheless entitled to prove under the assignment and to vote at meetings of creditors, but in ascertaining the amount of any such claim a deduction for interest shall be made for the time that has to run until the claim becomes due.  R.S.O. 1990, c. A.33, s. 25 (5).

Contestation of claim

26 (1) At any time after the assignee receives from any person claiming to be entitled to rank on the estate proof of the person’s claim, notice of contestation of the claim may be served by the assignee upon the claimant.  R.S.O. 1990, c. A.33, s. 26 (1).

(2) Within thirty days after the receipt of the notice, or within such further time as the judge allows, an action shall be brought by the claimant against the assignee to establish the claim, and a copy of the statement of claim in the action, or of the claim in case the action is brought in the Small Claims Court, shall be served on the assignee, and in default of such action being brought and statement of claim or claim served within the time limited the claim to rank on the estate is forever barred.  R.S.O. 1990, c. A.33, s. 26 (2).

Service on solicitor of assignee

(3) The notice by the assignee shall contain the name and place of business of a solicitor upon whom service of the statement of claim or claim may be made, and service upon the solicitor shall be deemed sufficient service.  R.S.O. 1990, c. A.33, s. 26 (3).

Right of assignee to compel plaintiff to proceed with action against assignor

(4) Where prior to the assignment an action has been commenced against the assignor and is pending at the time of the assignment, the assignee may, by notice served upon the plaintiff in the action, require the plaintiff to proceed, and the plaintiff is bound to proceed in that action to establish the claim, instead of bringing an action against the assignee as provided for by subsection (2), and the plaintiff may thereupon apply to the court in which the action is brought for an order adding the assignee as a party defendant in the action, and the assignee may be so added upon such terms as to the costs that may be subsequently incurred as the court or a judge thereof, or the judge making the order, directs.  R.S.O. 1990, c. A.33, s. 26 (4).

Procedure where assignee is satisfied but assignor desires to dispute

27 (1) If the assignee is satisfied with the proof adduced in support of a claim but the assignor disputes it, the assignor shall do so by notice in writing to the assignee, stating the grounds of dispute, and the notice shall be given within ten days after the assignor is notified in writing by the assignee that the assignee is satisfied with the proof adduced and not afterwards unless by leave of the judge.  R.S.O. 1990, c. A.33, s. 27 (1).

Where assignee does not require action to be brought

(2) If upon receiving the notice of dispute the assignee does not consider it proper to require the claimant to bring an action to establish the claim, the assignee shall notify the assignor in writing of the fact, and the assignor may thereupon, and within ten days of receiving the notice, apply to the judge for an order requiring the assignee to serve a notice of contestation.  R.S.O. 1990, c. A.33, s. 27 (2).

(3) The order shall be made only if, after notice to the assignee, the judge is of opinion that there are good grounds for contesting the claim.  R.S.O. 1990, c. A.33, s. 27 (3).

Where decision of assignee final

(4) If the assignor does not make such an application, the decision of the assignee is, as against the assignor, final and conclusive.  R.S.O. 1990, c. A.33, s. 27 (4).

Decision of judge on validity of claim

(5) If upon the application the claimant consents in writing, the judge may in a summary manner decide the question of the validity of the claim.  R.S.O. 1990, c. A.33, s. 27 (5).

Intervention by assignor at trial

(6) If an action is brought by the claimant against the assignee, the assignor may intervene at the trial either personally or by counsel for the purpose of calling and examining or cross-questioning witnesses.  R.S.O. 1990, c. A.33, s. 27 (6).

Retention of assets in Ontario and deposit of money

28 (1) No property or assets of an estate assigned under this Act shall be removed out of Ontario without the order of the judge, and the proceeds of the sale of any such property or assets and all money received on account of any estate shall be deposited by the assignee in a financial institution described in subsection (1.1) and shall not be withdrawn or removed without the order of the judge, except in payment of dividends and charges incidental to winding up the estate. 2007, c. 7, Sched. 7, s. 180.

Financial institutions

(1.1) A financial institution referred to in subsection (1) is,

(a)  a bank or authorized foreign bank within the meaning of section 2 of the Bank Act (Canada);

(b)  a corporation registered under the Loan and Trust Corporations Act ;

(c)  a credit union within the meaning of the Credit Unions and Caisses Populaires Act, 2020 ; or

(d)  a retail association as defined under the Cooperative Credit Associations Act (Canada). 2007, c. 7, Sched. 7, s. 180; 2020, c. 36, Sched. 7, s. 294.

(2) An assignee or any person acting in the assignee’s place who contravenes this section is liable to a penalty of $500. R.S.O. 1990, c. A.33, s. 28 (2).

Application of penalty

(3) One-half of the penalty goes to the person suing therefor and the other half belongs to the estate. R.S.O. 1990, c. A.33, s. 28 (3).

Imprisonment in default of payment of penalty

(4) In default of payment of the penalty and all costs incurred in an action or proceeding for the recovery thereof within the time limited by the judgment, the court in which the action is brought may order that the assignee or person may be imprisoned for any period not exceeding thirty days, and the assignee or person is disqualified from acting as assignee of any estate while the default continues. R.S.O. 1990, c. A.33, s. 28 (4).

2007, c. 7, Sched. 7, s. 180 - 01/10/2009

2020, c. 36, Sched. 7, s. 294 - 01/03/2022

Accounts to be kept accessible

29 Upon the expiration of one month from the first meeting of creditors or as soon as may be thereafter and afterwards from time to time at intervals of not more than three months, the assignee shall prepare, and keep constantly accessible to the creditors, accounts and statements of the doings as assignee and of the position of the estate.  R.S.O. 1990, c. A.33, s. 29.

30 The law of set-off applies to all claims made against the estate, and also to all actions instituted by the assignee for the recovery of debts due to the assignor, in the same manner and to the same extent as if the assignor were plaintiff or defendant, as the case may be, except in so far as any claim for set-off is affected by this or any other Act respecting frauds or fraudulent preferences.  R.S.O. 1990, c. A.33, s. 30.

Dividends, when to be paid

31 As large a dividend as can be paid with safety shall be paid by every assignee within twelve months from the date of the assignment, and earlier if required by the inspectors, and thereafter a further dividend shall be paid every six months and more frequently if required by the inspectors, until the estate is wound up and disposed of.  R.S.O. 1990, c. A.33, s. 31.

Notice of dividend sheet

32 As soon as a dividend sheet is prepared, notice thereof shall be given by registered mail to each creditor, enclosing an abstract of receipts and disbursements, showing what interest has been received by the assignee for money in the assignee’s hands, together with a copy of the dividend sheet, noting thereon the claims objected to, and stating whether any reservation has or has not been made therefor, and after the expiry of eight days from the date of mailing the notice, abstract and dividend sheet, dividends on all claims not objected to within that period shall be paid.  R.S.O. 1990, c. A.33, s. 32.

Distributing money and determining claims

33 (1) The assignee may take the proceedings authorized by subsections 11 (2), (3), (6) and (7) and 12 (7) and (8) and section 14 of the Creditors’ Relief Act, 2010 to be taken by a sheriff and, in that case, sections 11, 12, 13 and 14 of that Act apply with necessary modifications to proceedings for the distribution of money and determination of claims arising under an assignment made under this Act, with the substitution of “assignee” for “sheriff”, but this section does not relieve the assignee from mailing to each creditor the abstract and other information required by section 32 of this Act to be sent to creditors so far as the same is not contained in the list sent by the assignee under section 11 of the Creditors’ Relief Act, 2010 .  2010, c. 16, Sched. 4, s. 23 (2).

To what court application to be made

(2) Applications under this section shall be made to the Superior Court of Justice.  R.S.O. 1990, c. A.33, s. 33 (2); 2001, c. 9, Sched. D, s. 14.

2010, c. 16, Sched. 4, s. 23 (2) - 25/10/2010

Remuneration of assignee

34 The assignee shall receive such remuneration as is voted to the assignee by the creditors at a meeting called for the purpose after the first dividend sheet has been prepared, or by the inspectors, in case the creditors fail to provide therefor, subject to review by the judge upon complaint of the assignee or of any creditor.  R.S.O. 1990, c. A.33, s. 34.

Where remuneration not fixed before the final dividend

35 Where the remuneration of the assignee has not been fixed under section 34 before the final dividend, the assignee may insert in the final dividend sheet, and retain as remuneration, a sum not exceeding 5 per cent of the cash receipts, subject to review by the judge, but no application by the assignee to review the allowance shall be entertained unless the question of the assignee’s remuneration has been brought before a meeting of creditors competent to decide the same before the preparation of the final dividend sheet.  R.S.O. 1990, c. A.33, s. 35.

Remuneration of inspectors

36 (1) An assignee shall not make any payment or allowance to an inspector beyond actual and necessary travelling expenses in and about the assignee’s duties as inspector except under the authority of a resolution of the creditors passed at a meeting regularly called fixing the amount thereof, and in the notice calling the meeting the fixing of the remuneration of the inspectors shall be specially mentioned as one of the subjects to be brought before the meeting.  R.S.O. 1990, c. A.33, s. 36 (1).

Limit of allowance

(2) An inspector shall not be allowed more than $4 a day besides the inspector’s actual travelling expenses.  R.S.O. 1990, c. A.33, s. 36 (2).

Examination of assignor or employees

37 (1) Upon a resolution passed by a majority vote of the creditors present or represented at a meeting of creditors regularly called, or upon the written request of a majority of the inspectors, or upon an order made by the judge, the assignee may examine upon oath before an associate judge, local registrar, judge of the Superior Court of Justice, official examiner, official referee or any other person named in the order, the assignor or any person who is or has been the assignor’s agent, clerk, servant, officer or employee of any kind, touching the estate and effects of the assignor, and as to the property and means the assignor had when the earliest of the assignor’s debts or liabilities existing at the date of the assignment was incurred, and as to the property and means the assignor still has of discharging debts and liabilities, and as to the disposal made of any property since contracting the debt or incurring the liability, and as to any and what debts are owing to the assignor, and the person examined may be required by the assignee to produce upon such examination any property, book, document or paper in the person’s custody, power or control. R.S.O. 1990, c. A.33, s. 37 (1); 2001, c. 9, Sched. D, s. 14; 2020, c. 11, Sched. 5, s. 13; 2021, c. 4, Sched. 3, s. 19.

Where examination to take place

(2) Unless otherwise ordered, the examination shall take place in the area in which the person to be examined resides. R.S.O. 1990, c. A.33, s. 37 (2).

Procedure on examination

(3) The rules and procedure of the Superior Court of Justice as to the examination of a judgment debtor, or any clerk or employee or former clerk or employee of a judgment debtor, so far as may be, apply to an examination held under subsection (1). R.S.O. 1990, c. A.33, s. 37 (3); 2001, c. 9, Sched. D, s. 14.

2020, c. 11, Sched. 5, s. 13 - 08/01/2021

2021, c. 4, Sched. 3, s. 19 - 01/09/2021

Examination of persons having custody of property of assignor

38 Any person who has or is believed or suspected of having in the person’s possession or power any book, document or paper of any kind relating in whole or in part to the assignor, the assignor’s dealings or property and who refuses or fails to produce the book, document or paper for the inspection of the assignee within four days after demand in writing by the assignee may by order of the judge be examined before the judge or any of the officers mentioned in section 37 touching the book, document or paper, and is subject to the same consequences in the case of neglect to attend or refusal to disclose the matters in respect of which the person may be examined or to make such production as is mentioned in section 40.  R.S.O. 1990, c. A.33, s. 38.

When assignor does not attend or refuses to answer questions

39 If the assignor does not attend for examination and does not allege a sufficient excuse for not attending or, if attending, refuses to disclose the assignor’s property or transactions respecting the property or does not make satisfactory answers respecting the property or if it appears from the examination that the assignor has concealed or made away with property in order to defeat or defraud the assignor’s creditors or any of them, the judge may order the assignor to be committed to a correctional institution in the area in which the assignor resides for any period not exceeding twelve months.  R.S.O. 1990, c. A.33, s. 39.

Compelling attendance and production of books

40 Any person, other than the assignor, liable to be examined is subject to the same consequences in case of neglect to attend or refusal to disclose the matters in respect of which the person may be examined or to make production as a witness in an action in the Superior Court of Justice.  R.S.O. 1990, c. A.33, s. 40; 2001, c. 9, Sched. D, s. 14.

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Anti-Assignment Provisions and Assignments by ‘Operation of Law’: What Do I Have to Do? What Should I Do?

Introduction.

One of the key roles of legal due diligence in mergers and acquisitions (M&A) is to assist in the efficient and successful completion of any proposed M&A transaction. Due diligence is not merely a procedural formality but can serve as a proactive shield against unforeseen challenges and risks. One essential aspect of the legal due diligence process is reviewing third-party contracts to which the target entity is party, in order to better understand the scope of its commercial relationships and to anticipate any issues that may arise via the underlying contractual relationships as a result of completing the proposed M&A transaction.

A frequent reality in many M&A transactions is the requirement to obtain consents from third parties upon the “change of control” of the target entity and/or the transfer or assignment of a third-party contract to which the target is party. Notwithstanding the wording of such contracts, in many instances, the business team from the purchaser will often ask the question: “When is consent actually required?” While anti-assignment and change of control provisions are fairly ubiquitous in commercial contracts, the same cannot be said for when the requirement to obtain consent is actually triggered. The specifics of the proposed transaction’s structure will often dictate the purchaser’s next steps when deciding whether the sometimes-cumbersome process of obtaining consents with one or multiple third parties is actually needed.

This article examines what anti-assignment provisions are and how to approach them, depending on the situation at hand, including in the context of transactions where a change of control event may be triggered. This article also discusses how to interpret whether consent is required when faced with an anti-assignment provision which states that an assignment, including an assignment by operation of law , requires consent from the non-assigning party.

Understanding Anti-Assignment Provisions

Generally, an anti-assignment provision prohibits the transfer or assignment of some or all of the assigning party’s rights and obligations under the contract in question to another person without the non-assigning party’s prior written consent. By way of example, a standard anti-assignment provision in a contract may read as follows:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written consent of Company XYZ.

In this case, Company ABC requires Company XYZ’s prior written consent to assign the contract. Seems simple enough. However, not all anti-assignment provisions are cut from the same cloth. For example, some anti-assignment provisions expand on the prohibition against general contractual assignment by including a prohibition against assignment by operation of law or otherwise . As is discussed in greater detail below, the nuanced meaning of this phrase can capture transactions that typically would not trigger a general anti-assignment provision and can also trigger the requirement to get consent from the non-assigning party for practical business reasons.

To explore this further, it is helpful to consider anti-assignment provisions in the two main structures of M&A transactions: (i) asset purchases and (ii) share purchases.

Context of M&A Transactions: Asset Purchases and Share Purchases

There are key differences between what triggers an anti-assignment provision in an asset purchase transaction versus a share purchase transaction.

i) Asset Purchases

An anti-assignment provision in a contract that forms part of the “purchased assets” in an asset deal will normally be triggered in an asset purchase transaction pursuant to which the purchaser acquires some or all of the assets of the target entity, including some or all of its contracts. Because the target entity is no longer the contracting party once the transaction ultimately closes (since it is assigning its rights and obligations under the contract to the purchaser), consent from the non-assigning party will be required to avoid any potential liability, recourse or termination of said contract as a result of the completion of the transaction.

ii) Share Purchases

Provisions which prohibit the assignment or transfer of a contract without the prior approval of the non-assigning party will not normally, under Canadian law, be captured in a share purchase transaction pursuant to which the purchaser acquires a portion or all of the shares of the target entity. In other words, no new entity is becoming party to that same contract. General anti-assignment provisions are not typically triggered by a share purchase because the contracts are not assigned or transferred to another entity and instead there is usually a “change of control” of the target entity. In such cases, the target entity remains the contracting party under the contract and the consent analysis will be premised on whether the contract requires consent of the third party for a “direct” or “indirect” change of control of the target entity and not the assignment of the contract.

Importantly, some anti-assignment provisions include prohibitions against change of control without prior written consent. For example, the provision might state the following:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written approval of Company XYZ. For the purposes of this agreement, any change of control of Company ABC resulting from an amalgamation, corporate reorganization, arrangement, business sale or asset shall be deemed an assignment or transfer.

In that case, a change of control as a result of a share purchase will be deemed an assignment or transfer, and prior written consent will be required.

A step in many share purchase transactions where the target is a Canadian corporation that often occurs on or soon after closing is the amalgamation of the purchasing entity and the target entity. So, what about anti-assignment provisions containing by operation of law language – do amalgamations trigger an assignment by operation of law? The short answer: It depends on the jurisdiction in which the anti-assignment provision is being scrutinized (typically, the governing law of the contract in question).

Assignments by Operation of Law

In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale – situations not normally effected via legal statute or court-ordered proceeding in M&A transactions – will not in and of itself effect an assignment of that contract by operation of law . [1]

Still, one must consider the implications of amalgamations, especially in the context of a proposed transaction when interpreting whether consent is required when an anti-assignment provision contains by operation of law language. Under Canadian law, where nuances often blur the lines within the jurisprudence, an amalgamation will not normally effect the assignment of a contract by operation of law . The same does not necessarily hold true for a Canadian amalgamation scrutinized under U.S. legal doctrines or interpreted by U.S. courts. [2]

Difference Between Mergers and Amalgamations

As noted above, after the closing of a share purchase transaction, the purchasing entity will often amalgamate with the target entity ( click here to read more about amalgamations generally). When two companies “merge” in the U.S., we understand that one corporation survives the merger and one ceases to exist which is why, under U.S. law, a merger can result in an assignment by operation of law . While the “merger” concept is commonly used in the U.S., Canadian corporations combine through a process called “amalgamation,” a situation where two corporations amalgamate and combine with neither corporation ceasing to exist. For all of our Canadian lawyer readers, you will remember the Supreme Court of Canada’s description of an amalgamation as “a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands.” [3] Generally, each entity survives and shares the pre-existing rights and liabilities of the other, including contractual relationships, as one corporation. [4]

MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V.

As a practical note and for the reasons below, particularly in cross-border M&A transactions, it would be wise to consider seeking consent where a contract prohibits assignment by operation of law without the prior consent of the other contracting party when your proposed transaction contemplates an amalgamation.

In MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V. (a Superior Court of Delaware decision), the court interpreted a Canadian (British Columbia) amalgamation as an assignment by operation of law , irrespective of the fact that the amalgamation was effected via Canadian governing legislation. In essence, the Delaware court applied U.S. merger jurisprudence to a contract involving a Canadian amalgamation because the contract in question was governed by Delaware law. This is despite the fact that, generally, an amalgamation effected under Canadian common law jurisdictions would not constitute an assignment by operation of law if considered by a Canadian court. As previously mentioned, under Canadian law, unlike in Delaware, neither of the amalgamating entities cease to exist and, technically, there is no “surviving” entity as there would be with a U.S.-style merger. That being said, we bring this to your attention to show that it is possible that a U.S. court (if the applicable third-party contract is governed by U.S. law or other foreign laws) or other U.S. counterparties could interpret a Canadian amalgamation to effect an assignment by operation of law . In this case, as prior consent was not obtained as required by the anti-assignment provision of the contract in question, the Delaware court held that the parties to that agreement were bound by the anti-assignment provision’s express prohibition against all assignments without the other side’s consent. [5]

To avoid the same circumstances that resulted from the decision in MTA Canada Royalty Corp. , seeking consent where an anti-assignment provision includes a prohibition against assignment by operation of law without prior consent can be a practical and strategic option when considering transactions involving amalgamations. It is generally further recommended to do so in order to avoid any confusion for all contracting parties post-closing.

Practical Considerations

The consequences of violating anti-assignment provisions can vary. In some cases, the party attempting to complete the assignment is simply required to continue its obligations under the contract but, in others, assignment without prior consent constitutes default under the contract resulting in significant liability for the defaulting party, including potential termination of the contract. This is especially noteworthy for contracts with third parties that are essential to the target entity’s revenue and general business functions, as the purchaser would run the risk of losing key contractual relationships that contributed to the success of the target business. As such, identifying assignment provisions and considering whether they are triggered by a change of control and require consent is an important element when reviewing the contracts of a target entity and completing legal due diligence as part of an M&A transaction.

There can be a strategic and/or legal imperative to seek consent in many situations when confronted with contractual clauses that prohibit an assignment, either by operation of law or through other means, absent the explicit approval of the non-assigning party. However, the structure of the proposed transaction will often dictate whether consent is even required in the first place. Without considering this nuanced area of M&A transactions, purchasers not only potentially expose themselves to liability but also risk losing key contractual relationships that significantly drive the value of the transaction.

The  Capital Markets Group  at Aird & Berlis will continue to monitor developments in cross-border and domestic Canadian M&A transactions, including developments related to anti-assignment provisions and commercial contracts generally. Please contact a member of the group if you have questions or require assistance with any matter related to anti-assignment provisions and commercial contracts generally, or any of your cross-border or domestic M&A needs.

[1] An assignment by operation of law can be interpreted as an involuntary assignment required by legal statute or certain court-ordered proceedings. For instance, an assignment of a contract by operation of law may occur in, among other situations: (i) testamentary dispositions; (ii) court-ordered asset transfers in bankruptcy proceedings; or (iii) court-ordered asset transfers in divorce proceedings.

[2] MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V ., C. A. No. N19C-11-228 AML, 2020 WL 5554161 (Del. Super. Sept. 16, 2020) [ MTA Canada Royalty Corp. ].

[3] R. v. Black & Decker Manufacturing Co. , [1975] 1 S.C.R. 411.

[4] Certain Canadian jurisdictions, such as the Business Corporations Act (British Columbia), explicitly state that an amalgamation does not constitute an assignment by operation of law (subsection 282(2)).

[5] MTA Canada Royalty Corp .

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6. Contract Law

Assignment, Delegation, and Third Party

Beneficiaries:.

Contracts are by law assignable and delegable. This means that the rights conveyed by the contract may be transferred to another party by assignment, unless an express restriction on assignment exists within the contract, or unless an assignment violates public policy. Likewise, the duties imposed on a party may be transferred to another party by delegation, unless the contract expressly restricts delegation, there is a substantial interest in personal performance by the original party to the contract, or if delegation would violate public policy.

As a general rule, a party may assign contract rights without the consent of the other party. This is common in the construction industry where a general contractor may assign rights and delegate duties to subcontractors for specific work that needs to be performed under the main contract. For example, the general contractor may delegate the duty to perform electrical work to an electrician, as well as assign the right to be paid for the work performed.

In delegation and assignment, the original contracting party is not “off the hook” if it transfers its duties or rights to another party. For instance, a subtenant assumed the rights and duties imposed on the original tenant in a lease. If the subletting tenant does not pay the rent, the original tenant is still liable. The way to excuse oneself from legal liability under a contract is through novation. Novation is essentially a new contract that transfers all rights and duties to a new party to the contract and releases the previous party from any further obligation. It is the procedure in which one party is dismissed completely from the contract because a third party is substituted. In this situation, the dismissed party no longer has any liability under the original contract. To be effective, all parties must agree to the novation.

Third Party Beneficiaries:

Assignment and delegation under a contract should not be confused with rights of third party beneficiaries. A third party beneficiary is someone who is not a party to the contract but stands to benefit from it. Life insurance policies are a classic example of contracts with third party beneficiaries. The insurance company and the insured are parties to the contract. But the person who receives payment upon the death of the insured is the third party beneficiary.

Third party beneficiaries can either be intended or incidental. An intended beneficiary is someone whom the parties intend to receive the benefit of the contract. For example, the named beneficiary of a life insurance policy. The beneficiary does not need to know about the contract to have his or her rights recognized and enforced.

An incidental beneficiary is someone who benefits from a contract but was not intended by the parties to benefit. For example, if a business pays for a professional to landscape its property, the neighbors are incidental beneficiaries to the landscaping contract. They benefit from the improved appearance and property values, but the business did not enter into the contract with an intent to benefit them. Incidental beneficiaries do not have a legally enforceable interest in the contract.

Business Law and Ethics Canadian Edition Copyright © 2023 by Craig Ervine is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

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Canada: Novation Or Assignment, That Is The Question

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In the context of asset acquisition, and assuming that the target's contracts are assets being transferred to the purchaser, the transfer of contracts typically requires the parties to the transaction to go through either the novation process or assignment of the contract from the seller to the purchaser.

Novation is a trilateral agreement between the original parties to a contract and the purchaser seeking to replace the seller to the contract. Novation transfers not only the rights and benefits under the original contract to the purchaser, but also the obligations, thus releasing the seller from all obligations under the original contract. All parties to the original agreement need to consent to the new agreement.

Novation has been referred to as the "Hail Mary" defence for parties seeking to avoid contractual liability, however, the standard of establishing novation is quite high. The Supreme Court of Canada (the SCC ) has established a three-factor test for establishing novation. The party asserting novation must prove:

  • the purchaser assumes complete liability;
  • the creditor (one of the existing party to the original contract) must accept the purchaser as principal debtor and not merely as an agent or guarantor of the seller; and
  • the creditor (one of the existing party to the original contract) must accept the new contract in full satisfaction of, and as substitution for, the old contract. [1]

The SCC also stated that in the absence of an express new agreement, a court should not find novation unless the circumstances are especially compelling. [2]

Assignment and assumption, on the other hand, transfer the contractual rights and benefits held by the assignor/seller to the assignee/purchaser, but not the assignor/seller's obligations under the contract. The burden under the original contract remains with the assignor/seller, thus the assignor/seller can be held liable if the assignee/purchaser fails to perform under the contract. The assignor/seller can protect itself from potential liability by obtaining an indemnity from the assignee/purchaser.

Unlike novation, an assignment does not extinguish the original agreement and does not create a new and separate agreement. The original contract remains in force. Also, unlike novation, depending on the terms of the subject contract, an assignment of the contract may not require the consent of all parties to the agreement. Depending on the terms of the agreement, the assignor/seller usually only needs to provide a notice to the non-assigning party.

If the contract is silent as to its assignability, then the courts have held that the contract is generally assignable, except for personal services contract, where consent must be obtained. [3] The SCC has held that personal services contracts are contracts based on confidences, skills or special personal characteristics such as to implicitly limit the agreement to the original parties, [4] and the determination of whether a contract is personal services contract is often made by the courts.

Assignment and assumption may be more convenient for the seller than novation given that the seller may not need to ask for consent from a third party to assign its interest in an agreement to the purchaser, however, the seller needs to be aware of the potential liabilities if the purchaser fails to perform under the assigned contract. Although novation can protect the seller from such future liabilities, it is a more cumbersome process for all parties involved, and may not be feasible if the third party refuses to provide consent. Therefore, it is essential for parties to assess their relationship with the third party before proceeding with novation.

[1] National Trust Co. v Mead et al. [1990] 2 SCR 410 (SCC).

[3] Canadian Encyclopedic Digest, 4 th ed , ( Thomson Reuters Canada, 2016) at Title 35, Contracts, XIII 1(d)(i).

[4] Rodaro v. Royal Bank of Canada , 2002 CanLII 41834 (ONCA).

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assignment law canada

assignment law canada

Assignment Involves Transfer of Rights to Collect Outstanding Debts

Does the law allow a creditor to sell a debt to someone else, debt can be bought and sold or otherwise transferred from a creditor who is owed money to another person who then becomes the assignee creditor with the right to collect the outstanding debt., understanding what constitutes as a legally binding assignment of creditor rights to collect a debt.

Loan Application Document

Right to Collect on Debts

Within the decision of Clark v. Werden , 2011 ONCA 619 the Court of Appeal confirmed the existence of the right to transfer debts as an assignment in accordance to the Conveyancing and Law of Property Act , R.S.O. 1990, c. C.34 , which prescribes the various requirements when a creditor transfers ownership of rights involving monies owed, among other things. Specifically, the Court of Appeal stated:

Clark v. Werden , 2011 ONCA 619 at paragraph 13

[13]   The ability to assign a debt or legal chose in action is codified in s. 53 of the  Conveyancing and Law of Property Act , which provides that a debt is assignable subject to the equities between the original debtor and creditor and reads as follows:
53 (1) Any absolute assignment made on or after the 31st day of December, 1897, by writing under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor.

Partially Assigned

Interestingly, it should be noted that the statute law refers to an " absolute assignment "; however, such reference is made without fully defining the rights and duties of creditors and assignees in regards to concerns for the partial assignment of a debt.  However, in such circumstances as where a partial assignment of debt occurs, and therefore where there is more one assignee who assumes various rights of the original creditor, the assignee must include all assignees, or the original creditor if the original creditor retained a portion of the debt, when legal action is brought against debtor.  This requirement was stated by the Court of Appeal within the case of DiGuilo v. Boland , 1958 CanLII 92 wherein it was stated:

DiGuilo v. Boland , 1958 CanLII 92

The main reason why an assignee of a part of a debt is required to join all parties interested in the debt in an action to recover the part assigned to him is in my opinion because the Court cannot adjudicate completely and finally without having such parties before it.  The absence of such parties might result in the debtor being subjected to future actions in respect of the same debt, and moreover might result in conflicting decisions being arrived at concerning such debt.

Failed Notice

Of potentially grave concern to creditors, and potentially with great relief to debtors, for an assignee to retain the right to pursue the debtor, express written notice of the assignment is required.  This requirement was stated in 1124980 Ontario Inc. v. Liberty Mutual Insurance Company and Inco Ltd. , 2003 CanLII 45266  as part of the four part test to establish the right to pursue an assigned debt:

1124980 Ontario Inc.  v. Liberty Mutual , 2003 CanLII 45266 at paragraph 44

[44]   Accordingly, for there to be a valid legal assignment under  section 53(1) of the  CLPA , four requirements must be met:
a)  there must be debt or chose in action;
b)  the assignment must be absolute;
c)  the assignment must be written; and
d)  written notice of the assignment must be given to the debtor.

Where there is a failure of notice, and therefore failure to comply with the Conveyancing and Law of Property Act , it is said that the right to assign fails in law; however, relief in equity, via an equitable assignment may be available to an assignee affected by failure of notice.  Generally, in equity, when failure of notice occurs, the assignee is unable, in law, to bring an action in the name of the assignee and may do so only in the name of the creditor; however, even in the absence of proper notice as results in failure of assignment in law, and failure ot enjoin the creditor in an action pursued as an equitable assignment, the court may remain prepared to waive such a requirement whereas such occurred in the matter of  Landmark Vehicle Leasing Corporation v. Mister Twister Inc. , 2015 ONCA 545 wherein it was stated:

Landmark v. Mister Twister , 2015 ONCA 545 at paragraphs 10 to 16

[10]    Section 53(1) requires “ express notice in writing ” to the debtor.  Although there is some ambiguity in her reasons, it would appear that the trial judge found that Mr.  Blazys had express notice of the assignment, but not notice in writing.  Ross Wemp Leasing therefore did not assign the leases to Landmark in law: see  80 Mornelle Properties Inc.  v. Malla Properties Ltd. , 2010 ONCA 850 (CanLII) , 327 D.L.R.  (4th) 361, at para.  22 .  Ross Wemp Leasing did, however, assign the leases to Landmark in equity.  An equitable assignment does not require any notice, let alone written notice:  Bercovitz Estate v. Avigdor , [1961] O.J.  No.  20 (C.A.), at paras.  16, 25.
[11]   The appellants, relying on  DiGuilo v. Boland , 1958 CanLII 92 (ON CA), [1958] O.R.  384 (C.A.), aff’d, [1961] S.C.C.A.  vii, argue that as the appellants did not have written notice of the assignment, Landmark could not sue on its own.  Instead, Landmark had to join Ross Wemp Leasing in the action.  The appellants argue that the failure to join Ross Wemp Leasing requires that the judgment below be set aside.
[12]    DiGuilo does in fact require that the assignor of a chose in action be joined in the assignee’s claim against the debtor when the debtor has not received written notice of the assignment.  The holding in DiGuilo tracks rule 5.03(3) of the  Rules of Civil Procedure , R.R.O.  1990, Reg.  194 : In a proceeding by the assignee of a debt or other chose in action, the assignor shall be joined as a party unless,
(a) the assignment is absolute and not by way of charge only; and
(b) notice in writing has been given to the person liable in respect of the debt or chose in action that it has been assigned to the assignee.  [Emphasis added.]
[13]   Yet the assignee’s failure to join the assignor does not affect the validity of the assignment or necessarily vitiate a judgment obtained by the assignee against the debtor.  Rule 5.03(6) reads:
The court may by order relieve against the requirement of joinder under this rule.
[14]   The joinder requirement is intended to guard the debtor against a possible second action by the assignor and to permit the debtor to pursue any remedies it may have against the assignor without initiating another action:  DiGuilo , at p.  395.  Where the assignee’s failure to join the assignor does not prejudice the debtor, the court may grant the relief in rule 5.03(6) : see  Gentra Canada Investments Inc.  v. Lipson , 2011 ONCA 331 (CanLII), 106 O.R.  (3d) 261, at paras.  59 - 65 , leave to appeal refused, [2011] S.C.C.A.  No.  327.
[15]   In this case, the trial judge found that Mr.  Blazys, and effectively all of the appellants, gained actual notice of the lease assignments very shortly after the assignments were made and well before Landmark sued.  Armed with actual, albeit not written, notice of the assignment, the appellants could fully protect themselves against any prejudice from Landmark’s failure to join Ross Wemp Leasing.  Had the appellants seen any advantage in joining Ross Wemp Leasing, either to defend against Landmark’s claim or to advance a claim against Ross Wemp Leasing, the appellants could have moved for joinder under rule 5.03(4).  The appellants’ failure to bring a motion to add Ross Wemp Leasing speaks loudly to the absence of any prejudice caused by Landmark’s failure to join the assignor.
[16]   Ross Wemp Leasing perhaps should have been a party to the proceeding.  Landmark’s failure to join Ross Wemp Leasing, however, did not prejudice the appellants and should have had no impact on the trial judgment.  If requested, this court will make a  nunc pro tunc order relieving Landmark from the requirement of joining Ross Wemp Leasing in the action.

Summary Comment

The rights to collect on a debt can be sold and transferred from the original creditor to a substitute creditor or assignee who then takes on the rights of the original creditor.  Indeed, the selling and buying of individual debts, or debts within an entire portfolio debts is common within business.  The entire collection services industry is based on the concept of buying outstanding debt and then standing in the shoes of the original creditor and pursuing the payment of the debt.  Other forms of buying and selling debt includes mortgage swaps, among other things.

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Lending & Secured Finance Laws and Regulations Canada 2023-2024

ICLG - Lending & Secured Finance Laws and Regulations - Canada Chapter covers common issues in lending and secured finance laws and regulations – including guarantees, collateral security, financial assistance, syndicated lending and LIBOR replacement.

Chapter Content Free Access

1. overview, 2. guarantees, 3. collateral security, 4. financial assistance, 5. syndicated lending/agency/trustee/transfers, 6. withholding, stamp and other taxes; notarial and other costs, 7. judicial enforcement, 8. bankruptcy proceedings, 9. jurisdiction and waiver of immunity, 10. licensing, 11. libor replacement, 12. other matters.

1.1        What are the main trends/significant developments in the lending markets in your jurisdiction?

Canadian banks have been widely recognised internationally as well capitalised, well managed and well regulated, and a major contributing force in the Canadian economy.  The lending market in Canada is characterised by a wide range of domestic banks, pension funds, credit unions and insurance companies, as well as major foreign banks and finance companies, offering a range of commercial lending services and financial products on par with those offered anywhere else in the world. 

In recent years, there has been increasing growth of the private debt investor market in Canada.  A number of newer non-bank funds and institutions have become active in mid-market leveraged lending and other lines of business.  With continued active participation by Canadian banks as well as foreign lenders, and the increasing presence of non-bank lending funds, the Canadian lending market continues to remain very competitive and lending margins remain tight.

Fintech lending also continues to grow in the Canadian market.  At present, the regulation of fintech in Canada is generally fragmented and siloed.  No single central authority regulates the wide variety of functions associated with fintech.  In general, regulation is entity-based rather than function-based and is split between federal and provincial jurisdictions.  Federal law covers banking and anti-money laundering, while provincial law governs such matters as securities, consumer protection and privacy.  Both federal and provincial authorities are working towards developing more unified fintech strategies.

Canadian lenders and borrowers are also increasingly turning to sustainable finance instruments (such as green, social and sustainability-linked loans and bonds) to highlight their commitment to sustainability, enhance relationships with stakeholders and gain access to new markets.  In addition, in March 2022, the Government of Canada issued its inaugural green bond.  

1.2        What are some significant lending transactions that have taken place in your jurisdiction in recent years?

Domestic and cross-border lending in Canada has remained active in recent years.  The market this past year continued to see a return to business as usual for many lenders and borrowers following the COVID-19 pandemic, with competitive re-pricings and renewals and extensions of existing transactions in many sectors and a lending market generally impacted by pent-up liquidity and demand for new loan inventory.  New transactions have continued in many sectors, including health care, forestry, public-private partnership (P3), tech and financial services.  For example, in recent years, significant financings were completed in connection with ongoing private acquisitions such as IPL Plastics by Madison Dearborn, PointClickCare’s acquisition of Collective Medical, and the acquisition of Domtar by Paper Excellence.  We expect this trend to continue into 2023, with, for example, the anticipated acquisition of Apotex by SK Capital Partners.  Several companies, including blue-chip firms like CN Rail, have signed or converted conventional credit facilities into sustainability-linked loans in recent years.

Despite a brief slowdown during the initial stages of the COVID-19 pandemic, lending in the P3 space continued to grow.  In Ontario, several P3 projects related to light rail and subway expansion achieved financial close, and the province announced a pipeline of 37 P3 projects, valued at more than $60 billion.  Among other highlights, the Federal Government achieved financial close on the $1.8 billion Energy Services Acquisition Program (ESAP), the province of British Columbia closed the $950 million Pattullo Bridge Replacement Project and the province of Nova Scotia closed the $700 million Highway 104 project.

2.1        Can a company guarantee borrowings of one or more other members of its corporate group (see below for questions relating to fraudulent transfer/financial assistance)?

Yes, it can.

2.2        Are there enforceability or other concerns (such as director liability) if only a disproportionately small (or no) benefit to the guaranteeing/securing company can be shown?

In some circumstances, the enforceability of a guarantee could be challenged by stakeholders on the basis that it was granted in a manner that was oppressive, unfairly prejudicial or that unfairly disregards the interests of creditors or minority shareholders under the oppression provisions of applicable corporate legislation.  A guarantee could also be subject to challenge under provisions of applicable insolvency legislation dealing with transactions at under value or preference claims.  Directors and officers would only be subject to personal liability in such cases if specific facts were pleaded to justify such a remedy (e.g. wrongdoing).

2.3        Is lack of corporate power an issue?

If the guarantor is a corporation, it must have the corporate power and capacity to give guarantees.  Most business corporations have the powers and capacity of a natural person and it is unusual to see restrictions on the power to issue guarantees in the guarantor’s constating documents.  However, certain corporations created by statute for a public purpose (such as school boards) may still be subject to the doctrine of ultra vires and therefore may require express legislative authority to give guarantees.

2.4        Are any governmental or other consents or filings, or other formalities (such as shareholder approval), required?

Other than typical corporate authorising resolutions, no formal approvals are generally required.  Where a corporation provides financial assistance by way of guarantee or otherwise, in some provinces the corporation is required to disclose the financial assistance to its shareholders after such assistance is given.

2.5        Are net worth, solvency or similar limitations imposed on the amount of a guarantee?

This is not the case for corporations incorporated federally or under the laws of most provinces.  However, the corporate laws in a few Atlantic provinces and in two territories continue to prohibit financial assistance to members of an intercompany group if there are reasonable grounds to believe that the corporation would be unable to meet prescribed solvency tests after giving the assistance, subject to specific exceptions.

2.6        Are there any exchange control or similar obstacles to enforcement of a guarantee?

There are no such obstacles subject to the provisions of applicable Canadian federal money laundering and anti-terrorism legislation.

3.1        What types of collateral are available to secure lending obligations?

Most types of personal property and real property are available to secure lending obligations, subject to certain limitations by contract (e.g. contractual restrictions on assignment) or by law (e.g. government receivables, permits, licences and quotas).

Provincial legislation generally governs the creation and enforcement of security.  All Canadian provinces (except Québec) have adopted comprehensive personal property security acts (PPSAs) conceptually similar to Article 9 of the United States Uniform Commercial Code (UCC).  The PPSAs govern the creation, perfection and enforcement of security interests in a debtor’s personal property, and create a scheme for determining the priority of competing interests in the same collateral.  The PPSAs apply to any transaction that in substance creates a security interest in personal property, regardless of the form of document used to grant the interest.

Québec, Canada’s only civil law jurisdiction, has a European-style Civil Code, the Civil Code of Québec (CCQ), that governs the creation and enforcement of security on movable (personal) and immovable (real) property.

Certain types of property continue to be subject to additional federal registration and filing regimes (examples include intellectual property and assets in shipping, aircraft and railways).  The federal Bank Act also has a special security regime available as an option available only to federally chartered banks for certain classes of debtors and collateral.

3.2        Is it possible to give asset security by means of a general security agreement or is an agreement required in relation to each type of asset? Briefly, what is the procedure?

A general security agreement (GSA) can be and often is used to grant security over all of the debtor’s present and after-acquired personal property of every type and description.  Separate agreements are not required for each type of asset.  The GSA or other security agreement must contain a description of the collateral sufficient to enable it to be identified.  However, a GSA typically does not extend to real property and separate requirements apply to registration and documentation of security against land, as described under question 3.3 below.

In most cases, the secured party perfects the security interest by registering a financing statement under the PPSA filing regime in the applicable province.  Where the financing statement should be registered depends on the type of collateral.  In general, security interests in most tangible personal property are registered in the province in which the collateral is located at the time of attachment.  Security interests in most intangibles and certain types of goods normally used in more than one jurisdiction must be registered in the province in which the debtor is deemed to be located under the relevant debtor location rules.  Except in Ontario, British Columbia and Saskatchewan, a debtor with multiple places of business is deemed to be located at its “chief executive office”.  Under amendments to Ontario’s PPSA that came into force on December 31, 2015, amendments to British Columbia’s PPSA that came into force on June 1, 2019 and amendments to Saskatchewan’s PPSA that came into force on June 22, 2020, most debtors are deemed to be located in the jurisdictions in which they were incorporated or organised, similar to the more generally applicable debtor location rules under Article 9 of the UCC.

The hypothec, Québec’s only form of consensual security, may be granted by a debtor to secure any obligation, and may create a charge on existing and after-acquired movable (personal) or immovable (real) property, although there are certain additional formalities that must be met when taking security on immovable (real) property.  It may be made with or without delivery, allowing the grantor of the hypothec to retain certain rights to use the property.  A hypothec on moveable (personal) property must be published (registered) in Québec’s Register of Personal and Movable Real Rights (“RPMRR”) in accordance with applicable formalities in order to enable it to be set up against third parties (i.e., perfected).

3.3        Can collateral security be taken over real property (land), plant, machinery and equipment? Briefly, what is the procedure?

A lender may take collateral security over land or real property by way of a mortgage of the land, a mortgage of lease, a debenture, or, if the real (immovable) property charged is in Québec, an immovable deed of hypothec.  Interests in real property are registered in the land registry system of the relevant province.  In Québec, the immovable hypothec must be received by a Québec notary and registered in the applicable land registry office.

It should be noted that a higher rate of interest on amounts in arrears secured by a real property mortgage may be unenforceable under the Interest Act (Canada).

The procedure for taking security over plant, machinery and equipment that constitutes personal property under the PPSA or movables under the CCQ is described in question 3.2 above.

Personal property may include “fixtures” (goods that become affixed to real property), but if the security interest has not attached prior to affixation, the creditors registered against the land gain priority, with limited exceptions.  What constitutes a fixture is a factual question and the common law has taken a contextual approach.  To protect the priority of its interest in a fixture, a secured party must both (1) perfect its security interest under the PPSA, and (2) register its interest in the land registry system.  Under the CCQ, the rules for determining what constitutes movable or immovable property are different – but the end results are comparable.

3.4        Can collateral security be taken over receivables? Briefly, what is the procedure? Are debtors required to be notified of the security?

Yes.  The procedure for taking security over receivables is the same as described in question 3.2 above.

Notice to account debtors is not required to create a perfected security interest in accounts receivable under the PPSA.  However, account debtors for the receivables are obligated to pay the receivable directly to the secured party only after receiving notice from the secured party that the receivable has been assigned to it.  In addition, an absolute assignment of receivables constitutes a “security interest” regardless of whether it secures any obligations.

Amendments to the Ontario and Saskatchewan PPSAs that came into force on May 15, 2020 and June 22, 2020, respectively, introduced new provisions distinguishing electronic and physical chattel paper (“chattel paper” meaning a record that evidences both a monetary obligation and a security interest in or a lease of specific goods, such as leases for personal property, chattel mortgages and conditional sales contracts).  With regard to electronic chattel paper, these new provisions provide a regime for conflict of laws, attachment, perfection and priority, resulting in electronic chattel paper being treated similarly to other forms of intangible collateral.

Under the Civil Code of Québec, if assigned receivables constitute a “universality of claims”, the assignment must be registered for such assignment to be set up against third parties (i.e. perfected).  However, account debtors must still be notified of such assignment before an account debtor is obligated to pay the receivable directly to the secured party.  If the receivables do not constitute a universality of claims, the assignment may be perfected with respect to Québec obligors only by actual notice of the assignment to such obligors.

Under Canadian federal legislation, subject to prescribed exceptions, receivables owed by the federal government can be assigned only absolutely (not as security) and only with appropriate notice to the appropriate official of the government of Canada, which must be acknowledged.  Some provinces have similar legislation covering receivables owed by the provincial government.  In Canada, asset-based lenders frequently exclude government receivables from the borrowing base.

3.5        Can collateral security be taken over cash deposited in bank accounts? Briefly, what is the procedure?

The PPSA and CCQ permit a lender to take security over deposit accounts.  Under the PPSA, deposits in bank accounts are treated as “accounts” or receivables owed by the depository bank to the depositor and, under the CCQ, as claims against the bank.  Accordingly, in PPSA jurisdictions, security interests in deposit accounts are perfected by registering a financing statement in the province where the debtor is deemed to be located under the applicable debtor location rules (see question 3.2 above).  Traditionally, a bank lender that maintained deposit accounts for its debtor and wished to take security in such accounts would do so by way of set-off and a “flawed asset” approach.  However, in light of a Supreme Court of Canada case that poses a risk of recharacterisation, the lender should also register a PPSA financing statement against the debtor. 

No PPSA jurisdiction has yet adopted control as a means of perfecting security interests in deposit accounts.  However, under the CCQ, it is possible to perfect hypothecs over cash deposits in bank accounts (referred to as  monetary claims) by “control”.  Where the creditor is also the account bank, the creditor obtains control by the debtor (i.e. the account holder) consenting to such monetary claims securing performance of its obligations to the creditor.  Where the creditor is not the account bank, the creditor obtains control by either: (i) entering into a control agreement with the account bank and the debtor, pursuant to which the account bank agrees to comply with the creditor’s instructions without the additional consent of the debtor; or (ii) becoming the account holder.

3.6        Can collateral security be taken over shares in companies incorporated in your jurisdiction? Are the shares in certificated form? Can such security validly be granted under a New York or English law-governed document? Briefly, what is the procedure?

A security interest in shares issued by companies incorporated in any jurisdiction is typically documented by way of a standalone pledge agreement or included in a GSA or a hypothec.  While the jurisdiction governing validity, perfection or non-perfection of the pledge will be determined under applicable conflict of laws rules, the security interest may be granted under a document governed by New York or English law, subject to the principles discussed in question 7.1 below.

Under the PPSA and the Securities Transfer Act, 2006 (STA), versions of which are in force in all Canadian PPSA jurisdictions (harmonised legislation is in force in Québec), a secured party can perfect its security interest in shares by registering under the PPSA or by taking control under the STA (or both).  An interest perfected by control has priority over one perfected only by registration or simple delivery of the unendorsed share certificates.

Shares may be either certificated or uncertificated.  For certificated shares, taking physical possession of the share certificates, together with a suitable endorsement (which can be on a separate instrument such as a stock power of attorney), meets the STA requirement for control.  For uncertificated shares, control is obtained by being registered as the shareholder or through a control agreement with the issuer.  Control over securities held indirectly through securities accounts can be achieved by other means (for example, a control agreement with the relevant intermediary). 

It should also be noted that under securities legislation, a private company’s constating documents must include a restriction on the right to transfer its shares.  This restriction usually states that each transfer of the company’s shares requires approval by the company’s directors or shareholders.

3.7        Can security be taken over inventory? Briefly, what is the procedure?

Yes.  The procedure is generally the same as described in question 3.2. 

The security interest may be perfected by registering a financing statement in the province or territory in which the inventory is situated at the time the security interest attaches, except that inventory of a type normally used in more than one jurisdiction that is leased or held for lease by the debtor to others requires registration in the province in which the debtor is deemed to be located.

The purchase of inventory is often financed by way of a purchase money security interest (or PMSI).  A PMSI in collateral is, in substance, a security interest given by either the seller or a third party to finance the purchase of the collateral by the debtor.  The PPSA provides that a PMSI in inventory and other types of collateral (other than investment property or its proceeds) have priority over any other security interest in the same collateral given by the same debtor (even if that other security interest was registered first) so long as certain timing and (in the case of inventory) third-party notice requirements are satisfied.  The CCQ does not offer a comparable approach and subordination or cessation of rank is required from any prior ranking secured creditor.  This subordination or cessation of rank must be registered to be opposable to third parties.

3.8        Can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility (see below for questions relating to the giving of guarantees and financial assistance)?

3.9        What are the notarisation, registration, stamp duty and other fees (whether related to property value or otherwise) in relation to security over different types of assets?

Registration fees are payable in connection with the filing of PPSA financing statements (and the Québec equivalent), increasing with the length of the registration period.  These are relatively modest – for example, in Ontario it is $8.00 for each year of the registration period or $500 for a perpetual registration.

A modest tax is payable upon registering real property security in certain Canadian jurisdictions.  The tax is based on a fee and where the face amount of the registration exceeds the value of the land, one is permitted to pay on the basis of a percentage of the property value. 

No Canadian jurisdiction imposes stamp taxes or duties in relation to security.  In Québec, if a notarial deed of hypothec is used, the notary will generally charge a fee for execution, keeping it in its notarial records and for issuing copies; however, there is no additional material cost.

3.10      Do the filing, notification or registration requirements in relation to security over different types of assets involve a significant amount of time or expense?

The registration requirements in most cases are relatively straightforward and inexpensive.  As noted above in question 3.7, a PMSI in inventory requires prior notice to certain secured parties in order to ensure priority.

3.11      Are any regulatory or similar consents required with respect to the creation of security?

For certain special types of regulated property, consents or approvals may be required by governmental authorities or agencies for both the creation and enforcement of security.  Governmental licences, permits and quotas are subject to specific regimes requiring notice or consent in many cases.  See question 3.4 regarding government receivables.

3.12      If the borrowings to be secured are under a revolving credit facility, are there any special priority or other concerns?

A security interest and hypothec in personal property or movable property may secure both present and future advances under a revolving credit facility.  Where future advances are made while a security interest is perfected, the security interest has the same priority with respect to each future advance as it has with respect to the first advance, with certain limited exceptions in favour of unsecured execution and other creditors that seize the collateral if the secured party makes the advance after receiving notice of their interests.  A security interest in personal property is not automatically discharged by reason of the fact that the outstanding balance under a revolving line of credit has been paid down to zero and subsequently re-advanced.

Generally, advances on a real property mortgage made without actual notice of a subsequent claim will typically have priority over such subsequent claims and, accordingly, mortgages securing revolving credit normally provide that subsequent liens are prohibited.  Certain priority exceptions apply such as in respect of construction liens.  Real property mortgages securing revolving credit should be properly worded to address situations where the borrowing is fully or partially repaid and thereafter re-advanced.

3.13      Are there particular documentary or execution requirements (notarisation, execution under power of attorney, counterparts, deeds)?

In Québec, security over immovable property or in favour of a collateral agent on behalf of multiple secured parties (referred to as a “hypothecary representative”) requires execution of the deed of hypothec before an authorised Québec notary.

Newly adopted Québec legislation related to the protection of the French language introduced amendments to the CCQ that require all documents registered in Québec’s Land Register (ex: hypothecs on immovable property) and applications for registration at the RPMRR to be drafted in French, subject to a very limited number of exceptions.  In the latter case, the documents underlying the registration may be in English; however, the information contained in the prescribed registration form, including the description of the collateral, must be drafted in French.

Upon their coming into force, additional amendments will also require that parties to an adhesion contract (contracts pre-determined by one party) must be provided with a French version of the document prior to the execution of an English version.  While loan contracts, financial instruments and other related contracts are exempt from this requirement, it may still apply to documents entered into in connection with these types of financial agreements.

Each province has different requirements with respect to real property, including specific registration forms, evidence of corporate authority, affidavits and, in some jurisdictions, originals for registration.

4.1        Are there prohibitions or restrictions on the ability of a company to guarantee and/or give security to support borrowings incurred to finance or refinance the direct or indirect acquisition of: (a) shares of the company; (b) shares of any company that directly or indirectly owns shares in the company; or (c) shares in a sister subsidiary?

Most Canadian corporations are not subject to such restrictions, except those created under the laws of some Atlantic provinces (New Brunswick and Newfoundland) and certain territories (the Northwest Territories and Nunavut).  Certain provinces (Alberta, British Columbia and Saskatchewan) require that financial assistance be disclosed to shareholders, but failure to disclose does not invalidate the transaction.

5.1        Will your jurisdiction recognise the role of an agent or trustee and allow the agent or trustee (rather than each lender acting separately) to enforce the loan documentation and collateral security and to apply the proceeds from the collateral to the claims of all the lenders?

Yes.  The agency concept is recognised in Canadian common law and agents are commonly used in syndicated lending for both administration of loans and holding collateral security in Canada.  Indenture trustees are typically used in public bond transactions.

5.2        If an agent or trustee is not recognised in your jurisdiction, is an alternative mechanism available to achieve the effect referred to above, which would allow one party to enforce claims on behalf of all the lenders so that individual lenders do not need to enforce their security separately?

For purposes of holding collateral security in the province of Québec, the mechanism commonly used requires the appointment of the collateral agent as a “hypothecary representative”, together with a notarial deed of hypothec in favour of such hypothecary representative.

5.3        Assume a loan is made to a company organised under the laws of your jurisdiction and guaranteed by a guarantor organised under the laws of your jurisdiction. If such loan is transferred by Lender A to Lender B, are there any special requirements necessary to make the loan and guarantee enforceable by Lender B?

Assignments of debt, guarantees and security can be effected by contract pursuant to a standard assignment and assumption agreement.  Where the assignor is also the secured party of record (whether as collateral agent or otherwise), PPSA financing statements (and the Québec equivalent) are typically amended to record the assignment, although such amendments are not required for enforceability (except in Québec).  Mortgage or security assignments are required to be filed under the applicable land registry to give effect to the assignment.  In the case of Québec, where the security is in favour of the hypothecary representative and there is a replacement of the hypothecary representative (as a result of the assignment or otherwise), the new hypothecary representative cannot exercise recourses under the hypothec until a notice of such replacement is registered where applicable.

6.1        Are there any requirements to deduct or withhold tax from (a) interest payable on loans made to domestic or foreign lenders, or (b) the proceeds of a claim under a guarantee or the proceeds of enforcing security?

There are generally no requirements to deduct or withhold tax on payments of interest by a debtor or guarantor (whether by voluntary payment, enforcement or otherwise) made by a domestic debtor or guarantor to domestic lenders.

Conventional interest payments made to arm’s length lenders that are non-residents of Canada are generally not subject to Canadian withholding tax, regardless of their country of residence.  In addition, conventional interest payments made to certain non-arm’s length US resident lenders may qualify for an exemption from Canadian withholding tax under the Canada-US Tax Treaty. 

Certain interest payments made in respect of back-to-back loans, including loans between related parties, which are channelled through an independent third-party intermediary, may be subject to Canadian withholding tax.

In the absence of any applicable exemption under a bilateral tax treaty or under the Income Tax Act (Canada), withholding tax on interest payments, such as participating debt interest, may apply at rates of up to 25%.

6.2        What tax incentives or other incentives are provided preferentially to foreign lenders? What taxes apply to foreign lenders with respect to their loans, mortgages or other security documents, either for the purposes of effectiveness or registration?

Generally, there are no material tax or other incentives provided preferentially to foreign investors or creditors and no taxes apply to security documents for the purposes of effectiveness or registration.

6.3        Will any income of a foreign lender become taxable in your jurisdiction solely because of a loan to, or guarantee and/or grant of, security from a company in your jurisdiction?

While each lender’s tax position must be examined individually, generally a non-resident lender’s income should not be taxable in Canada solely because of a single secured loan transaction in the absence of a fixed presence in Canada or other connecting factors.

6.4        Will there be any other significant costs that would be incurred by foreign lenders in the grant of such loan/guarantee/security, such as notarial fees, etc.?

(See question 3.9 for a discussion of the relevant filing and notarial fees.)  There are no stamp taxes, registration taxes or documentary taxes that are generally applicable in connection with authorisation, delivery or performance of loans, guarantees or security.

6.5        Are there any adverse consequences for a company that is a borrower (such as under thin capitalisation principles) if some or all of the lenders are organised under the laws of a jurisdiction other than your own? Please disregard withholding tax concerns for the purposes of this question.

Thin capitalisation rules under the Income Tax Act (Canada) determine whether a Canadian corporation may deduct interest on the amount borrowed from a “specified non-resident shareholder” of the corporation or from a non-resident person who does not deal at arm’s length with a “specified shareholder” (collectively, “specified non-residents”).  A “specified shareholder” of a corporation is, in general terms, a person who, either alone or together with persons with whom they do not deal at arm’s length, owns 25% or more of the voting shares, or owns 25% or more of the fair market value of the issued and outstanding shares, of the corporation.

Under the thin capitalisation rules, Canadian corporations are effectively prevented from deducting interest arising in respect of the portion of loans from specified non-residents that exceeds one-and-a-half times the corporation’s specified equity (in highly simplified terms, retained earnings, share capital and contributed surplus attributable to specified non-residents).  In addition, any interest expenses that are disallowed under these rules are deemed to be dividends paid to the lender for non-resident withholding tax purposes, and are subject to withholding tax.

The thin capitalisation rules may also apply in respect of interest paid or payable on back-to-back loans.  However, most traditional forms of commercial collateralisation or guarantees should not attract the application of these rules, especially where any loans made by the third party are clearly made from the third party’s own sources.

The thin capitalisation rules further apply (with appropriate modifications) to (i) Canadian resident trusts, (ii) non-resident corporations or trusts that carry on business in Canada (in respect of loans that are used in the course of that Canadian business), and (iii) partnerships in which a Canadian resident corporation or trust or a non-resident corporation or trust is a member.

7.1        Will the courts in your jurisdiction recognise a governing law in a contract that is the law of another jurisdiction (a “foreign governing law”)? Will courts in your jurisdiction enforce a contract that has a foreign governing law?

Subject to certain exceptions and conditions (notably in consumer contexts), Canadian courts will recognise and apply the parties’ choice of governing law if it is specifically pleaded and proven by expert testimony.

Canadian courts will not apply the foreign law if the choice of law is not bona fide or is contrary to public policy, or if so doing would be considered enforcement of foreign revenue, or expropriatory or penal law.  Additionally, Canadian courts will apply Canadian procedural law and certain provincial and federal laws that have overriding effect, such as bankruptcy and insolvency statutes, federal crime legislation, employment legislation and consumer protection legislation.

7.2        Will the courts in your jurisdiction recognise and enforce a judgment given against a company in New York courts or English courts (a “foreign judgment”) without re-examination of the merits of the case?

A foreign monetary judgment may be enforced in Canada if the judgment is final and the foreign court properly assumed jurisdiction.  As long as these requirements are met, a Canadian court will not examine whether the foreign court correctly applied its own substantive and procedural laws. 

In considering the issue of jurisdiction, Canadian courts will apply their own principles of jurisdiction.  Generally, a contractual submission to the jurisdiction of the foreign court will be sufficient, but in the absence of such submission, the Canadian court will examine whether there was a “real and substantial connection” between the foreign court and the cause of action or the defendant.  While the test is often applied generously and flexibly by the courts, a fleeting or relatively unimportant connection will not support a foreign court’s assumption of jurisdiction.

There are certain limited defences which preclude recognition related to circumstances under which the foreign judgment was obtained (such as by fraud or in a manner breaching principles of natural justice) and whether there is any reason it would be improper or contrary to public policy to recognise the foreign judgment.  In practice, these defences rarely succeed.

7.3        Assuming a company is in payment default under a loan agreement or a guarantee agreement and has no legal defence to payment, approximately how long would it take for a foreign lender to (a) assuming the answer to question 7.1 is yes, file a suit against the company in a court in your jurisdiction, obtain a judgment, and enforce the judgment against the assets of the company, and (b) assuming the answer to question 7.2 is yes, enforce a foreign judgment in a court in your jurisdiction against the assets of the company?

  •  n Ontario, if no defence is filed in response to a claim, a default judgment may be obtained between 20 and 60 days after the claim has been served on the defendant, depending on where service is effected.  After any judgment is obtained, and subject to it being stayed by the filing of a notice of appeal, enforcement proceedings may be commenced immediately.
  • An application hearing to enforce a foreign judgment in Ontario may generally be obtained within approximately four to five months.

Procedural and substantive law differs by province, but the timing described above is similar in most other provinces.

7.4        With respect to enforcing collateral security, are there any significant restrictions that may impact the timing and value of enforcement, such as (a) a requirement for a public auction, or (b) regulatory consents?

A secured creditor must give the debtor reasonable time to pay following demand, before taking action to enforce against its collateral security (even if the debtor purported to waive these rights).

Where a secured creditor intends to enforce security over substantially all of an insolvent debtor’s inventory, accounts receivable or other property used in relation to the debtor’s business, in addition to delivering a demand, the secured creditor must also deliver a notice of intention to enforce security in the form prescribed under the Bankruptcy and Insolvency Act (BIA) at least 10 days before such enforcement, unless the debtor consents to an earlier enforcement.  A longer notice period may be required if collateral is located in the province of Québec, especially if the collateral includes immovable property, where the notice period may reach 60 days.

If a secured creditor intends to deal with the collateral itself or through a privately appointed receiver (where applicable), it must also give advance notice to the debtor and other interested parties of its intention to dispose of the collateral or accept the collateral as final settlement of the debtor’s obligations.  This notice period is typically 15–20 days depending on the applicable PPSA and can run concurrently with the BIA enforcement notice.

Although there is no requirement for a public auction, a secured creditor (and any receiver) must act in good faith and in a commercially reasonable manner when selling or otherwise disposing of the collateral.  However, if a lender wishes to buy the collateral, it may only do so at a public sale, unless otherwise permitted by a court.  Generally speaking, no regulatory consents are required to enforce on collateral security.

7.5        Do restrictions apply to foreign lenders in the event of (a) filing suit against a company in your jurisdiction, or (b) foreclosure on collateral security?

To maintain an action in certain provinces, foreign lenders may be required to become extra-provincially registered.

There are no specific restrictions on a foreign lender’s ability to enforce security in Canada.  However, if the lender chooses to exercise those remedies to either foreclose on the collateral security or to credit-bid its debt, such that the foreign lender ends up owning the debtor’s Canadian assets, the foreign lender may be subject to restrictions imposed by the Investment Canada Act or the Competition Act.

7.6        Do the bankruptcy, reorganisation or similar laws in your jurisdiction provide for any kind of moratorium on enforcement of lender claims? If so, does the moratorium apply to the enforcement of collateral security?

Yes, a stay of proceedings may affect the rights of secured and unsecured creditors in some circumstances to the extent set out in question 8.1.

7.7        Will the courts in your jurisdiction recognise and enforce an arbitral award given against the company without re-examination of the merits?

Provincial arbitration acts (or – in Québec – the Code of Civil Procedure) provide for the enforcement of arbitral awards by application to the court.  Canadian courts will not re-examine the merits of an arbitral award; however, the award may be set aside on specified grounds including, but not limited to, an invalid arbitration agreement, an award outside of the jurisdiction of the arbitrator, or a reasonable apprehension of bias on the part of the arbitrator.

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards and the UNCITRAL Model Law on International Commercial Arbitration have been adopted or substantially implemented in all Canadian provinces and provide rules for the enforcement of international arbitral awards.  Subject to limited grounds on which enforcement of an international arbitral award may be refused, the awards are generally enforceable in Canada.

8.1        How does a bankruptcy proceeding in respect of a company affect the ability of a lender to enforce its rights as a secured party over the collateral security?

Bankruptcy and insolvency in Canada are primarily governed by two federal statutes: the BIA and the Companies’ Creditors Arrangement Act (CCAA).  The BIA provides a comprehensive liquidation scheme for companies and individuals, along with a streamlined reorganisation regime.  The CCAA is Canada’s large company reorganisation statute.  Although some aspects of creditors’ rights are determined by provincial statutes, bankruptcy and insolvency law is mostly uniform across Canada.  Insolvency proceedings under the BIA or CCAA will result in the imposition of a stay of proceedings either by a Canadian court or pursuant to the relevant statute. 

Under the BIA liquidation proceedings, the automatic stay of proceedings imposed upon commencement will not prevent a secured creditor from realising or otherwise dealing with its collateral.  By contrast, in a court-appointed receivership (an alternative form of liquidation proceeding governed by the BIA), receivership orders routinely contain language staying the actions of secured creditors.

If a debtor files a notice of intention (NOI) to make a proposal or a proposal to creditors under the BIA (a reorganisation proceeding), a secured creditor’s enforcement rights will be automatically stayed during the reorganisation proceeding, unless: (i) the secured creditor took possession of the collateral before the filing; (ii) the secured creditor delivered its BIA enforcement notice more than 10 days prior to the filing of the NOI; or (iii) the debtor consents to the secured creditor exercising its enforcement rights.  The stay under an NOI lasts for up to six months.

Reorganisation proceedings under the CCAA are commenced when an initial order is granted by the court.  The CCAA explicitly empowers a court to grant a stay of proceedings against the debtor on any terms that it may impose.  The stay provision in the CCAA initial order typically prohibits secured creditors from enforcing their security interests against the debtor’s property during the proceeding.  The stay under such an initial order is only granted for an initial emergency term of 10 days, which may then be extended, as required and approved by the Court, without a hard upper limit like the one mentioned above for the NOI.

8.2        Are there any preference periods, clawback rights or other preferential creditors’ rights (e.g., tax debts, employees’ claims) with respect to the security?

(a) Avoidance actions

Under the BIA and the CCAA, certain transactions, including the granting of security, the transfer of property and other obligations are voidable if incurred during specified pre-bankruptcy time periods.  Subject to certain conditions and exemptions, if such transactions are made with a view to giving one creditor a preference over others, they may be set aside if entered into during the period that is: (i) three months before the initial bankruptcy event for transactions at arm’s length; and (ii) one year before the initial bankruptcy event for transactions not at arm’s length.

Transfers of property (or services sold), in which the consideration the debtor receives is less than the fair market value, subject to certain other conditions and exemptions, may be set aside under the BIA or CCAA if entered into during the period that is: (i) one year before the initial bankruptcy event for transactions at arm’s length; and (ii) five years before the initial bankruptcy event for transactions not at arm’s length.

There is also provincial legislation providing for setting aside other fraudulent conveyances or preferential transactions

(b) Statutory priority claims

In Canada, a number of statutory claims may “prime” or take priority over a secured creditor.  Priming liens commonly arise from a debtor’s obligation to remit amounts collected or withheld on behalf of the government.  Such amounts include unremitted employee deductions for income tax, government pension plan contributions, government employment insurance premiums and unremitted federal goods and services taxes, provincial sales taxes, municipal taxes and workers’ compensation assessments.  In Ontario, statutory deemed trusts may give rise to a priority claim for certain unpaid claims of employees, including, in some circumstances, a deemed trust arising upon wind-up of a defined benefit pension plan for any deficiency amounts, contributions or shortfalls.  In addition, there are a number of statutes that create priming liens in specific industries (for example, repair and storage liens, construction liens and brokerage liens).  These priming liens may attach to all of the property of the debtor.  In some cases, the priority of statutory claimants and secured creditors is sometimes reversed by the commencement of an insolvency proceeding against the debtor.

(c) Priority claims – insolvency

An insolvency proceeding in respect of the debtor may give rise to a number of additional liens that would rank in priority to a secured creditor’s claims.

The BIA provides employees of a bankrupt employer or an employer in receivership with a priority charge on the employer’s “current assets” for unpaid wages and vacation pay (but not for severance or termination pay) for the six-month period prior to bankruptcy or receivership to a maximum of $2,000 per employee (plus up to $1,000 for certain travelling expenses).  The priority charge ranks ahead of all other claims, including secured claims, except unpaid supplier rights.

Subject to possible legislative amendments as discussed below, the BIA also grants a priority charge in bankruptcies and receiverships for outstanding current service pension plan contributions, subject only to the wage earners’ priority.  The pension contribution priority extends to all assets, not just current assets, and is unlimited in amount.  The pension charge secures: (i) amounts deducted as pension contributions from employee wages but not contributed to the plan prior to a bankruptcy or receivership; and (ii) amounts required to be contributed by the employer to a pension plan for “normal costs”.  The charge does not extend to unfunded deficits arising upon a wind-up of a defined benefit plan and should not include scheduled catch-up or special payments required to be made by an employer because of the existence of a solvency deficiency.  

Bill C-228, the Pension Protection Act (Canada), is a new federal private members bill, which as of November 23, 2022 passed the third reading in Parliament and has now passed the second reading in the Senate as of December, 2022.   The effect of Bill C-228 is to add provisions to the BIA and the CCAA which provide that, upon the filing of an employer participating in a defined benefit pension plan under proceedings under the BIA or CCAA, all defined benefit pension obligations of the employer under the defined benefit plan (including unpaid special payments, amounts required to liquidate an unfunded liability or solvency deficiency) will benefit from a form of priority treatment, ranking ahead of a lender’s security interest.  The priority treatment will be effective four years after the Bill comes into force (currently not based on the timing of any insolvency filing by the debtor company).

The CCAA and the reorganisation provisions of the BIA expressly prohibit a court from sanctioning a proposal, compromise or arrangement or a sale of assets, unless it is satisfied that the debtor has arranged to pay an amount equal to the amounts secured by the wage and pension priority charges discussed above.

(d) Priority claims – court charges

In CCAA and BIA reorganisations, debtors may obtain interim financing (often referred to as debtor-in-possession (DIP) financing).  Both the CCAA and the BIA expressly authorise the court to grant fresh security over a debtor’s assets to DIP lenders in priority to existing security interests up to a specified amount approved by the court.

In addition to the priming liens noted above, in a CCAA or BIA reorganisation, the court has the authority to order priming charges to secure payment of directors’ post-filing liabilities and to secure the fees and disbursements of experts, court-appointed officials and certain other “interested parties” at the court’s discretion.  The court may also order priming charges to secure payment to designated “critical suppliers”, typically restricted to securing payment for post-filing supply.

The priority of the DIP charge, directors’ charge, expense charge and any critical supplier charge in respect of the debtor’s assets is determined by the court.

(e) Unpaid suppliers’ rights

The BIA provides certain unpaid suppliers with a right to repossess goods sold and delivered to a purchaser within 30 days before the date of bankruptcy or receivership of such purchaser.  The unpaid supplier’s right to repossess goods effectively ranks ahead of a secured creditor. 

An unpaid supplier claim is rarely successful as the supplier has the burden of demonstrating that all requirements have been met, including: (i) that the debtor has possession of the goods; (ii) that the goods are identifiable; (iii) that the goods are in the same state; and (iv) that the goods have not yet been sold.

8.3        Are there any entities that are excluded from bankruptcy proceedings and, if so, what is the applicable legislation?

Banks (including the Canadian business of foreign banks authorised to do business in Canada), insurance companies and trust corporations are excluded from the BIA and CCAA and their wind-up is governed by the Winding-Up and Restructuring Act (Canada).  The BIA and CCAA also exclude telegraph companies.

8.4        Are there any processes other than court proceedings that are available to a creditor to seize the assets of a company in an enforcement?

Upon default, a secured creditor may exercise “self-help” remedies to take possession and control of collateral individually or through the appointment of a private receiver (if provided in its security documents).  Secured creditors may also seek court appointment of an interim receiver to preserve and protect collateral on an expedited basis.

9.1        Is a party’s submission to a foreign jurisdiction legally binding and enforceable under the laws of your jurisdiction?

Except in certain consumer contexts, the submission by a party to the non-exclusive jurisdiction of the courts of a foreign jurisdiction should be recognised as valid, provided that service of process requirements are complied with.  The submission by a party to the exclusive jurisdiction of the courts of a foreign jurisdiction is generally recognised unless there is “strong cause” not to do so.

9.2        Is a party’s waiver of sovereign immunity legally binding and enforceable under the laws of your jurisdiction?

The State Immunity Act (Canada) governs sovereign immunity of foreign states and any separate agency of a foreign state (e.g. state trading corporations).  Private corporations that are not “organs” of a foreign state are not entitled to sovereign immunity.

Sovereign immunity may be waived if the state or agency submits to the jurisdiction of the Canadian court by agreement, either before or after commencement of the proceedings.  Sovereign immunity is subject to certain exceptions (e.g. commercial activities and property damage actions, terrorist activities and certain maritime claims).

10.1      What are the licensing and other eligibility requirements in your jurisdiction for lenders to a company in your jurisdiction, if any? Are these licensing and eligibility requirements different for a “foreign” lender (i.e., a lender that is not located in your jurisdiction)? In connection with any such requirements, is a distinction made under the laws of your jurisdiction between a lender that is a bank versus a lender that is a non-bank? If there are such requirements in your jurisdiction, what are the consequences for a lender that has not satisfied such requirements but has nonetheless made a loan to a company in your jurisdiction? What are the licensing and other eligibility requirements in your jurisdiction for an agent under a syndicated facility for lenders to a company in your jurisdiction?

There are no specific eligibility requirements for lenders solely as a result of entering into a secured lending transaction as lender or agent. 

Under the Bank Act (Canada), a “foreign bank” is generally not permitted to engage in or carry on business in Canada except through a foreign bank subsidiary, an authorised foreign branch or other approved entity.  A “foreign bank” is broadly defined in the Act and includes an entity incorporated or formed by or under the laws of a country other than Canada that (i) is a bank under the laws of a foreign country in which it carries on business or carries on business in a foreign country which would be considered the business of banking, (ii) engages in the business of providing financial services and uses the word “bank” in its name, (iii) is in the business of lending money and accepting deposit liabilities transferable by cheque or other instrument, (iv) engages in the business of providing financial services and is affiliated with a foreign bank, or (v) a foreign institution (that is not captured by the criteria in (i) to (iv) above) that controls a foreign bank or a Canadian bank.  A “foreign institution” means an entity not incorporated in Canada that is engaged in the business of banking, the trust, loan or insurance business, the business of a cooperative credit society or the business of dealing in securities or is otherwise engaged primarily in the business of providing financial services.

However, the Bank Act would not prohibit a foreign bank from making a loan to a Canadian borrower as long as the nature and extent of its activities in Canada do not amount to engaging in or carrying on business in Canada.  There is uncertainty about the exact boundaries of the general prohibition against engaging in or carrying on business in Canada.  The Act itself does not provide specific guidance on the factors that the main bank regulator – i.e. the Office of the Superintendent of Financial Institutions (OSFI) – may take into account in determining whether a foreign bank is engaging in or carrying on business in Canada.  OSFI will generally assess the particulars of each case against factors comparable to those considered by judicial bodies in interpreting the concept of “carrying on business in Canada” under statutes such as the Income Tax Act, keeping in mind that the policy considerations under other statutes may not be the same as under the Bank Act.

A non-bank lender may be required to obtain an extra-provincial licence in each province in which it is considered to be carrying on business under provincial corporate law.  Such determination may vary somewhat in each province; however, similar factors to those above will be relevant.  A corporation which owns or leases real property in, or has an employee or agent that is resident in, such province will generally be considered to be carrying on business in that province.

In the case of either a bank or non-bank lender, a loan transaction involving a Canadian borrower would not be void or voidable by reason of such lender’s failure to comply with applicable regulatory requirements in Canada.

11.1      Please provide a short summary of any regulatory rules and market practice in your jurisdiction with respect to transitioning loans from LIBOR pricing.

There are no Canadian-specific regulatory rules relating to transitioning loans from LIBOR pricing.  The market practice among Canadian lenders who are lending in US Dollars has been to replace LIBOR with Term SOFR and SOFR replacement provisions consistent with standards among major US financial institutions.

The Canadian Dollar Offered Rate (CDOR), which is the corresponding reference rate to LIBOR used for Canadian Dollar loans, is being discontinued.  On May 16, 2022, Refinitiv Benchmark Services (UK) Limited, the benchmark administrator of CDOR, announced that the calculation and publication of all CDOR tenors will permanently cease after their final publication on June 28, 2024.  The six-month and 12-month tenors of CDOR have already ceased being published. 

Similar to the approach that had been taken with LIBOR pricing, Canadian lenders have adopted fallback language for CDOR in Canadian loan documentation to address the discontinuance of CDOR.  It is anticipated that the Canadian Overnight Repo Rate Average, a risk-free rate, will replace CDOR as Canada’s benchmark rate.

12.1      How has COVID-19 impacted document execution and delivery requirements and mechanics in your jurisdiction during 2022 (including in respect of notary requirements and delivery of original documents)? Do you anticipate any changes in document execution and delivery requirements and mechanics implemented during 2021/2022 due to COVID-19 to continue into 2023 and beyond?

As noted in question 3.6, control of certificated securities for perfection purposes may be obtained by taking physical possession of share certificates together with a suitable endorsement.  Possession of the certificate and the endorsement must be physical possession of the original document.  Possession of an electronic copy of the certificate or the endorsement will not constitute control.  As a result of COVID-19, transaction practices have varied.  In some cases, closings have proceeded with electronic copies of documents together with perfection by registration while delivery of original signed copies is postponed to allow parties time to arrange physical delivery of originals as and when circumstances permit.  Alternatively, the issuer of the pledged securities may issue its securities in uncertificated book-based form and enter into a control agreement with the secured party.

In certain provinces, affidavits or commissioned original documents are required in respect of a real property registration.  The applicable governing authorities have released instructions on the electronic commissioning of such documents.  Typically, such authorities now permit a commissioner (or lawyer) to conduct a virtual commissioning (i.e., executing a document under oath) via video-conferencing tools whereby the commissioner administers the oath and witnesses the execution of the document via live video feed.  The signatory must then deliver the original signed document to the commissioner and the commissioner will then complete the jurat and fully commission the document.  Once fully commissioned, the commissioner will then submit the fully executed and commissioned document to the applicable registrar for registration.  Certain provinces require that the virtual commissioner be a commissioner of that specific province.

In the province of Québec, immovable hypothecs or hypothecs in favour of a collateral agent need to be received by a notary.  This would typically require all the signatories to sign before and in the presence of the notary.  Indeed, it was already the established practice to have the enabling corporate resolutions of a grantor expressly authorise a representative – for instance, counsel to the grantor – to sign for and on behalf of the grantor, thus facilitating signing “before” the notary.  As a result of COVID-19, some notaries now accept a type of electronic signature if the hypothec is signed while on videoconference with the receiving notary in accordance with the applicable formalities.  Alternatively, a practice has developed of expressly authorising a colleague of the receiving notary to sign for and on behalf of a signatory through either a corporate resolution or a mandate (or power of attorney).  This is proving to be very flexible and efficient and will likely continue after COVID-19.

12.2      Are there any other material considerations that should be taken into account by lenders when participating in financings in your jurisdiction?

The Criminal Code (Canada) makes it a criminal offence to receive interest at a criminal rate, defined as an effective annual rate of interest that exceeds 60%.  Interest in the Criminal Code (Canada) is broadly defined to include interest, fees, fines, penalties, commission and similar charges and expenses that a borrower pays in connection with the credit advanced.  This section has been considered almost exclusively in civil (not criminal) cases where the borrower seeks to avoid repayment by arguing that the contract was illegal.  Courts have struggled with deciding which, if any, contractual provisions should be enforced when a contract imposes a criminal rate of interest.

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By David McCabe and Tripp Mickle

David McCabe reported from Washington, and Tripp Mickle from San Francisco.

The federal government’s aggressive crackdown on Big Tech expanded on Thursday to include an antitrust lawsuit by the Justice Department against Apple, one of the world’s best-known and most valuable companies.

The department joined 16 states and the District of Columbia to file a significant challenge to the reach and influence of Apple, arguing in an 88-page lawsuit that the company had violated antitrust laws with practices that were intended to keep customers reliant on their iPhones and less likely to switch to a competing device. The tech giant prevented other companies from offering applications that compete with Apple products like its digital wallet, which could diminish the value of the iPhone, and hurts consumers and smaller companies that compete with it, the government said.

The Justice Department’s lawsuit is seeking to put an end to those practices. The government even has the right to ask for a breakup of the Silicon Valley icon.

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Read the Lawsuit Against Apple

The antitrust suit is the federal government’s most significant challenge to the reach and influence of the company.

The lawsuit caps years of regulatory scrutiny of Apple’s wildly popular suite of devices and services, which have fueled its growth into a nearly $2.75 trillion public company that was for years the most valuable on the planet. It takes direct aim at the iPhone, Apple’s most popular device and most powerful business, and attacks the way the company has turned the billions of smartphones it has sold since 2007 into the centerpiece of its empire.

By tightly controlling the user experience on iPhones and other devices, Apple has created what critics call an uneven playing field, where it grants its own products and services access to core features that it denies rivals. Over the years, it has limited finance companies’ access to the phone’s payment chip and Bluetooth trackers from tapping into its location-service feature. It’s also easier for users to connect Apple products, like smartwatches and laptops, to the iPhone than to those made by other manufacturers.

“Each step in Apple’s course of conduct built and reinforced the moat around its smartphone monopoly,” the government said in the lawsuit, which was filed in the U.S. District Court for the District of New Jersey. It added that the company’s practices resulted in “higher prices and less innovation.”

Apple says these practices make its iPhones more secure than other smartphones. But app developers and rival device makers say Apple uses its power to crush competition.

“This lawsuit threatens who we are and the principles that set Apple products apart in fiercely competitive markets,” an Apple spokeswoman said. “If successful, it would hinder our ability to create the kind of technology people expect from Apple — where hardware, software, and services intersect. It would also set a dangerous precedent, empowering government to take a heavy hand in designing people’s technology.”

Apple is the latest company the federal government has tried to rein in under a wave of antitrust pressure in recent years from both the Justice Department and the Federal Trade Commission, to which the Biden administration has appointed heads sharply focused on changing the laws to fit the modern era. Google, Meta and Amazon are all facing similar suits, and companies from Kroger to JetBlue Airways have faced greater scrutiny of potential acquisitions and expansion.

The lawsuit asks the court to stop Apple from engaging in current practices, including blocking cloud-streaming apps, undermining messaging across smartphone operating systems and preventing the creation of digital wallet alternatives.

The Justice Department has the right under the law to ask for structural changes to Apple’s business — including a breakup, said an agency official, who spoke on condition of anonymity. The official declined to identify what additional action the agency could request in this case but any demands would be tied to how a court rules on the question of whether — and how — Apple broke the law.

It’s unclear what implications the suit — which is likely to drag out years before any type of resolution — would have for consumers. Apple plans to file a motion to dismiss the case in the next 60 days. In its filing, the company plans to emphasize that competition laws permit it to adopt policies or designs that its competitors oppose, particularly when those designs would make using an iPhone a better experience.

Apple has effectively fought off other antitrust challenges. In a lawsuit over its App Store policies that Epic Games, the maker of Fortnite, brought in 2020, Apple persuaded the judge that customers could easily switch between its iPhone operating system and Google’s Android system. It has presented data showing that the reason few customers change phones is their loyalty to the iPhone.

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It also has defended its business practices in the past by highlighting how the App Store, which it opened in 2008, created millions of new businesses. Over the past decade, the number of paid app makers has increased by 374 percent to 5.2 million, which Apple has said is a testament to a flourishing marketplace.

Every modern-day tech giant has faced a major federal antitrust challenge. The Justice Department is also pursuing a case against Google’s search business and another focused on Google’s hold over advertising technology. The Federal Trade Commission filed a lawsuit accusing Meta, which owns Facebook, of thwarting competition when it bought Instagram and WhatsApp and another accusing Amazon of abusing its power over online retail. The F.T.C. also tried unsuccessfully to block Microsoft from acquiring Activision Blizzard, the video game publisher.

The lawsuits reflect a push by the regulators to apply greater scrutiny to the companies’ roles as gatekeepers to commerce and communications. In 2019, under President Donald J. Trump, the agencies opened antitrust inquiries into Google, Meta, Amazon and Apple. The Biden administration has put even more energy behind the effort, appointing critics of the tech giants to lead both the F.T.C. and the antitrust division of the Department of Justice.

In Europe, regulators recently punished Apple for preventing music streaming competitors from communicating with users about promotions and options to upgrade their subscriptions, levying a 1.8 billion-euro fine. App makers have also appealed to the European Commission , the European Union’s executive arm, to investigate claims that Apple is violating a new law requiring it to open iPhones to third-party app stores.

In South Korea and the Netherlands , the company is facing potential fines over the fees it charges app developers to use alternative payment processors. Other countries, including Britain, Australia and Japan, are considering rules that would undercut Apple’s grip on the app economy.

The Justice Department, which began its investigation into Apple in 2019, chose to build a broader and more ambitious case than any other regulator has brought against the company. Rather than narrowly focus on the App Store, as European regulators have, it focused on Apple’s entire ecosystem of products and services.

The lawsuit filed Thursday focuses on a group of practices that the government said Apple had used to shore up its dominance.

The company “undermines” the ability of iPhone users to message with owners of other types of smartphones, like those running the Android operating system, the government said. That divide — epitomized by the green bubbles that show an Android owner’s messages — sent a signal that other smartphones were lower quality than the iPhone, according to the lawsuit.

Apple has similarly made it difficult for the iPhone to work with smartwatches other than its own Apple Watch, the government argued. Once an iPhone user owns an Apple Watch, it becomes far more costly for them to ditch the phone.

The government also said Apple had tried to maintain its monopoly by not allowing other companies to build their own digital wallets. Apple Wallet is the only app on the iPhone that can use the chip, known as the NFC, that allows a phone to tap-to-pay at checkout. Though Apple encourages banks and credit card companies to allow their products to work inside Apple Wallet, it blocks them from getting access to the chip and creating their own wallets as alternatives for customers.

The government said that Apple refuses to allow game streaming apps that could make the iPhone a less valuable piece of hardware or offer “super apps” that let users perform a variety of activities from one application.

The government’s complaint uses similar arguments to the claims it made against Microsoft decades ago, in a seminal lawsuit that argued the company was tying its web browser to the Windows operating system, said Colin Kass, an antitrust lawyer at Proskauer Rose. He added that the most compelling allegation — and the one that brings it closest to the Microsoft case — is that Apple could be contractually preventing rivals from developing apps that work with other app providers, as “super apps” could.

Other legal experts noted that companies are legally allowed to favor their own products and services, so the government will have to explain why that is a problem with Apple.

“This case is about technology,” Mr. Kass said. “Can the antitrust laws force a company to redesign its product to make it more compatible with competitors’ products?”

Apple has defended itself against other antitrust challenges by arguing that its policies are critical to make its devices private and secure. In its defense against Epic Games, it argued that restraining the distribution of apps allowed it to protect the iPhone from malware and fraud. The practice benefited customers and made the iPhone more attractive than competing devices with Android’s operating system.

The government will try to show that the effect of Apple’s policies was to hurt consumers, not help them.

“Competition makes devices more private and more secure,” said Jonathan Kanter, assistant attorney general of the Justice Department’s antitrust division. “In many instances, Apple’s conduct has made its ecosystem less private and less secure.”

David McCabe covers tech policy. He joined The Times from Axios in 2019. More about David McCabe

Tripp Mickle reports on Apple and Silicon Valley for The Times and is based in San Francisco. His focus on Apple includes product launches, manufacturing issues and political challenges. He also writes about trends across the tech industry, including layoffs, generative A.I. and robot taxis. More about Tripp Mickle

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Legislative Review of the Cannabis Act : Final Report of the Expert Panel

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Download in PDF format (1.324 KB, 97 pages)

Organization: Health Canada

Date published: March 2024 Cat.: H134-37/2024E-PDF ISBN: 978-0-660-70615-3 Pub.: 230837

Prepared by:

Morris Rosenberg (Chair) Dr. Oyedeji Ayonrinde Dr. Patricia J. Conrod Lynda L. Levesque Dr. Peter Selby

Table of contents

Chapter 1: executive summary, chapter 2: recommendations and observations, chapter 3: introduction, chapter 4: summary of engagement, chapter 5: overview of the cannabis framework, chapter 6: public health.

Chapter 7: First Nations, Inuit and Métis

Chapter 8: Economic, social and environmental impacts

Chapter 9: adult access, chapter 10: criminal activity and displacement of the illicit market, chapter 11: medical access, chapter 12: research and surveillance, appendix a: glossary, appendix b: stakeholder list, appendix c: panel member biographies.

After almost a century of prohibition, Canada became the first major developed country to legalize and regulate cannabis when the Cannabis Act (the Act) came into force in 2018. Canada's approach to cannabis shifted from prohibiting and criminalizing activities with cannabis to one grounded in regulated and controlled access to minimize the risks and harms for individuals and communities.

In view of the wide-ranging impacts of the change from prohibition to legal, regulated access, Parliament established a requirement for the Act to be reviewed 3 years after its coming into force.

In September 2022, the Minister of Health and the Minister of Mental Health and Addictions and Associate Minister of Health appointed us as an independent Expert Panel to conduct a review. The mandate for the review, set out in section 151.1 of the Act, was to assess the administration and operation of the legislation, particularly:

  • impact of the Act on public health and, in particular, on the health and consumption habits of young persons with respect to cannabis use
  • impact of cannabis on Indigenous persons and communities
  • impact of the cultivation of cannabis plants in a dwelling-house

The Ministers also asked us to consider the following:

  • economic, social and environmental impacts of the Act
  • progress towards providing adults with access to strictly regulated, lower-risk, legal cannabis products
  • progress made in deterring criminal activity and displacing the illicit cannabis market
  • impact of legalization and regulation on access to cannabis for medical purposes
  • impacts on Indigenous Peoples, racialized communities and women, who might be at greater risk of harm or face greater barriers to participation in the legal industry based on identity or socio-economic factors

We were supported by the Legislative Review Secretariat, housed in Health Canada, whose role was to provide administrative and research support. We would like to thank the team for their invaluable assistance through this process.

Engagement process

We were provided with a report from Health Canada summarizing information and stakeholder perspectives it had collected in the lead up to the review. This report was published on Health Canada's website along with an invitation to submit written comments. With the help of the Secretariat, we developed a comprehensive engagement strategy to allow experts and people with relevant lived and living experience to provide more detailed guidance on particular topics and to answer specific questions. We held nearly 140 engagement sessions and heard from over 600 participants. We employed a distinctions-based approach for our engagement with First Nations, Inuit and Métis. Footnote 1

Principles and approach

Consistent with the purpose of the legislation, as stated in section 7 of the Act, we kept the protection of public health and public safety at the forefront of our review.

We took an evidence-informed approach, incorporating research findings, statistics and data, as well as the insights shared with us by stakeholders, experts, and those with lived and living experience. We applied a Sex and Gender-based Analysis Plus (SGBA Plus) lens in our work, recognizing that policies can have varying impacts on different subpopulations and communities. Footnote 2

It has only been 5 years since the Act came into force. It has been difficult to fully assess the impacts of legalization, given the limited time to collect data and evaluate outcomes and ongoing barriers to research. Despite these caveats, we aimed to identify dominant trends and themes, while also exercising caution when the evidence was not able to support a recommendation.

Based on the evidence presented to us, we believe that there has been significant progress made on several of the key objectives of the legislation. Notably, these include:

  • the establishment of a licensing framework supporting a legal industry that is providing adult consumers with a quality-controlled supply of a variety of cannabis products
  • steady progress in shifting adult consumers to the legal cannabis market
  • for the most part, adherence to rules on promotion, packaging and labelling, including prohibitions about making claims about health or lifestyle benefits
  • a significant reduction (95% between 2017 and 2022) in the number of charges for the possession of cannabis and minimizing the negative impact on some individuals from interactions with the criminal justice system

However, it would be a mistake for governments to adopt an attitude of complacency with the current regime or move away from a public health and public safety approach to cannabis. Continuous assessment of what works and what needs to change is necessary in a framework that is a radical shift from an era of prohibition, which limited research and evidence-based policy. Our consultations have uncovered the following areas of concern.

Youth and children

We are concerned with trends related to youth use of cannabis. While the data indicates that youth use has remained relatively stable since legalization, Canada continues to report among the highest rates of youth cannabis use in the world, and cannabis use among young adults has increased (for example, as described in our What We Heard Report , surveys now suggest that more than 4 in 10 Canadians aged between 20 and 24 report using cannabis in the past year). We find that the inadequate support for some interventions, particularly youth prevention initiatives, has contributed to this trend. Further, increasing reports of poisonings among children who have unintentionally consumed cannabis are troubling.

High-potency products

We are also increasingly concerned with the apparent shift toward the consumption of higher-potency cannabis products, since these products carry greater health risks, and there have been recent reports suggesting increases in cannabis-related health care presentations.

First Nations, Inuit and Métis communities

We acknowledge the barriers and challenges First Nations, Inuit and Métis communities have experienced with respect to the cannabis framework. We have heard consistently that First Nations, Inuit and Métis were not adequately consulted when the Act and related measures were developed. This has led to significant public health and public safety challenges in many communities and inequitable economic development opportunities. There is an urgent need to re-engage on these issues consistent with the Government of Canada's commitment to recognize the rights of Indigenous Peoples, and with a shared commitment by all parties to protecting public health and public safety.

Industry challenges

The legal cannabis industry has made substantial progress in shifting adult consumers to the legal cannabis market, although progress has been uneven across the country. The illicit cannabis market remains entrenched, and too many illicit retailers continue to operate both online and physical stores.

There are challenges for the sustainability of companies, particularly smaller-sized licensed cultivators and processors.

Industry representatives expressed concerns about the cost burden that the excise tax imposes on them, particularly the excise tax for dried cannabis, as well as the costs associated with regulatory fees and regulatory requirements that are imposed at both the federal and provincial and territorial levels.

The information available to us also suggests a lack of diversity in the sector, and that communities that were disproportionately harmed when cannabis was criminalized continue to face barriers to participation in the legal market.

Reduced interactions with the criminal justice system

We are encouraged by the significant decrease in Canadians' interactions with the criminal justice system related to cannabis; however, there is a need for more data on the extent to which racial bias continues to exist in law enforcement activities related to cannabis.

Need for more enforcement

While the Act contains serious offences and penalties to deter criminal activities with cannabis (such as unauthorized production and sale to youth), enforcement action has been limited due to shifting police priorities, inadequate resourcing and gaps in authority. A greater commitment to enforcement is needed to avoid undermining the integrity of the regime. Inadequate enforcement emboldens criminal actors and may be interpreted by some that illicit cannabis activity does not pose health or safety concerns.

Access to cannabis for medical purposes

The legalization of cannabis did not substantially facilitate research and there has been limited progress on evaluating the therapeutic benefits of cannabis. Patients continue to report many challenges obtaining reasonable access to cannabis for medical purposes, as well as difficulties finding reliable information, specific products, and supportive and knowledgeable health care professionals. The current lack of high-quality evidence can create difficulties for health care professionals and insurance providers faced with patient requests about the use of cannabis for medical purposes. Our consultations have helped us to identify several promising reforms to improve how patients access cannabis for medical purposes.

Filling research gaps

Deficiencies in the evidence available impeded our ability to fully assess the impacts of legalization on public health and public safety. To address critical knowledge gaps, sustained investment in surveillance and research in a range of disciplines will be required.

Nature of our advice

Achieving the public health and public safety objectives of the Act requires a multi-faceted approach relying on several policy instruments. Most of our recommendations involve targeted changes to policies and regulations, and bolstering support for research, surveillance and enforcement. We also propose new initiatives related to prevention and enhanced consumer information.

We have limited our formal recommendations to areas within the mandate of the Government of Canada. However, given that responsibilities in some areas of cannabis control rest with other levels of government and that other actors play important roles (such as law enforcement and health care professionals), we have made some observations in areas outside the purview of the federal government.

Moving forward, it will be important for the Government of Canada to allocate appropriate funding and resources to ensure the effective implementation of the cannabis framework. This will need to include allocating resources in areas that did not initially receive dedicated funding, such as research on the therapeutic potential of cannabis and prevention and treatment programming. In some circumstances difficult decisions will need to be made about when, or the extent to which, our recommendations can be implemented. While some new investments may be required, we encourage all levels of government to consider how existing resources can be redirected, and to consider how cannabis fits into broader priorities (for example, investment in mental health and addictions services, prevention programs, consumer information, and research and surveillance).

Summary of advice

Public health: youth.

Youth and young adults are more vulnerable to the adverse effects of cannabis. More needs to be done to drive change in youth behaviour to reduce prevalence of use and discourage harmful use. There may be lessons from the success in reducing youth use of other substances, such as tobacco, that can be applied to cannabis. Greater efforts towards increasing evidence-based prevention programs, and monitoring and enforcing laws against promotion and the sale of cannabis to young people, could help to address this concern.

Public health: Children

Increasing reports of poisonings among children who have unintentionally consumed cannabis, notably edible cannabis, were troubling. Children should never be able to access cannabis and these exposures should never occur. More research is needed to understand what products are involved in these incidents, as well as renewed efforts to educate consumers, including parents and caregivers, about ways to prevent these poisonings.

Public health: Adults

For adult consumers, we are concerned about the emerging shift toward increasingly potent cannabis products in the legal market (that is, products with high quantities or concentrations of delta-9-tetrahydrocannabinol [THC]), and recent studies suggesting increases in health care presentations, including for psychosis.

A mix of policy instruments should be used to mitigate the risks posed by higher-potency and novel cannabis products, including better research, making a wider variety of lower-potency products available to consumers, enhancing information for consumers, and ongoing regulatory compliance and enforcement efforts by Health Canada. If the current trend toward higher-potency cannabis cannot be halted or reversed, then Health Canada should be ready to restrict or prohibit certain products to protect Canadians from the associated harms. To be effective, such regulatory measures should be accompanied by strategies to prevent the illicit market from taking over this market segment.

Maintenance of public health measures

The evidence suggests that the framework includes appropriate controls and measures to manage the risks associated with the exposure to and consumption of cannabis, while providing adults who choose to use cannabis with access to a wide variety of quality-controlled products. That said, there are areas where implementation can be improved and where more effort is needed. This is particularly true of efforts to reduce the consumption of products with higher quantities or concentrations of THC.

After reviewing available evidence and the core health and safety-focused rules, we recommend that the majority should be maintained (including restricting promotion to environments where it is not visible to youth, requiring plain packaging and prohibiting products that are appealing to youth). That said, there are areas where greater clarity can be provided to industry about permissible promotion, packaging and labelling practices, and areas where certain changes could be made that would not impact the protection of public health.

Many First Nations, Inuit and Métis communities reported challenges in providing services for their people related to cannabis, given the many priorities they must address with limited resources. We recommend support for distinctions-based health, public health and mental health initiatives in communities, as well as support for evidence-based materials and programs to disseminate distinctions-based cannabis-related health information.

While the Act defines the authorities of the federal government and provincial and territorial governments, it is silent on the authority of First Nations, Inuit and Métis governments with respect to cannabis. This is a significant gap that negatively impacts the public health, public safety and equitable treatment of Indigenous communities and individuals seeking to participate in the cannabis industry.

We acknowledge the Government of Canada's commitment to align Canada's laws with the United Nations Declaration on the Rights of Indigenous Peoples through the United Nations Declaration on the Rights of Indigenous Peoples Act . However, given the uncertainties respecting the timelines and ways the Declaration will be implemented, and the public health and public safety challenges that are present in Indigenous communities, more immediate changes are necessary.

We call for amendments to the Cannabis Act , facilitating a collaborative process with Indigenous communities that would allow those who wish to exert more control over cannabis-related activities in their territories to enter into nation-to-nation agreements with the Government of Canada based on agreed-upon minimum standards to protect public health and public safety. We also recommend that Health Canada, as well as provinces and territories, take steps to improve their licensing processes to better support Indigenous applicants who wish to participate in the legal cannabis market.

Economic, social and environmental impacts

Industry representatives raised urgent concerns about their financial viability in the highly competitive market that exists today. These concerns are well-founded; however, any efforts to support the industry must be consistent with the public health and public safety objectives of the Act and not aim to increase the amount of cannabis consumed or the number of Canadians who use cannabis.

The Government of Canada should support continued displacement of the illicit market, while maintaining measures that protect public health and public safety. Continued monitoring of the legal share of the total market, relying on a combination of information sources that are sensitive to emerging trends, will be important to guide policymaking and priority-setting across all levels of government.

Health Canada should reduce the financial and administrative burden it places on participants in the legal industry. We recommend Health Canada accelerate its work to reduce unnecessary regulatory burden, informed by the experience gained over the last 5 years. It appears there is room to revise certain regulatory requirements without compromising public health or public safety.

Industry players have repeatedly called on the Government of Canada to reform the excise tax regime, particularly for dried cannabis where price decreases have substantially increased the tax burden for industry. We recognize that Finance Canada has committed to monitoring this issue, but we see an opportunity to update tax policy to reflect the current reality and to encourage positive changes in cannabis use behaviour by developing a progressive excise tax regime. This would involve higher-potency products being subject to more tax than lower-potency products.

At the outset of legalization, there was a missed opportunity to address the harms of prohibition. The Government of Canada has a role to play in encouraging the participation of marginalized and racialized groups in the industry, and to support inclusivity and remove barriers to success. Health Canada and its partners should take a comprehensive approach that looks beyond the issuance of a licence, to include pre- and post-licensing supports, and take a broad view of diversity so that policies and programs consider how to support the inclusion of smaller-sized businesses across the country.

We would like to see substantial improvements in the state of knowledge about the differential impacts of legalization on equity-deserving groups, as well as measures taken to address identified issues.

Adult access

The available information indicates that access to legal cannabis has improved since the Act came into force in October 2018. It appears that most adult Canadians who wish to obtain cannabis can do so from legal sources. However, we observed some geographical differences in ease of access, notably in the North.

One of the issues we heard most about was the amount of THC permitted in edible cannabis products. While industry stakeholders favoured increasing the limit to encourage consumers to shift to the legal market, public health stakeholders opposed this, citing concerns about the potential impact on child poisonings, cannabis-related emergency room visits and mental health impacts. Given these concerns, we believe Health Canada should maintain the current limit of 10 milligrams of THC per package in edible cannabis products and continue to develop the knowledge base in this area to determine whether there are conditions under which the limit could be raised without unduly impacting public health.

Criminal activity and displacement of the illicit market

Consumers who wish to access legal, regulated cannabis can do so, and we are encouraged by the evidence we have seen on the transition of adult consumers to the legal cannabis market, but more needs to be done.

We are also encouraged that legal access has reduced some of the negative social impacts on individuals, especially in terms of interactions with the justice system for the possession of cannabis.

However, we are concerned with the criminal activity that persists outside of the legal framework. The illicit production and sale of cannabis poses dangers to public safety (for example, illicit cannabis sales support other activities of organized crime, such as money laundering and possession of firearms) and to public health (for example, illicit products can carry greater risks than those available in the legal market because of inaccurately labelled cannabinoid content and the presence of contaminants).

We are also struck by the limited enforcement action. We appreciate that law enforcement does not have unlimited resources to address criminal activity and must prioritize; however, the integrity of the regime depends on deterring criminal activity and effective enforcement. Notwithstanding other priorities, we encourage law enforcement to focus their efforts on the involvement of organized crime, the diversion of cannabis from personal and designated production sites (where individuals register with Health Canada to produce their own cannabis for medical purposes), the proliferation of unauthorized retail stores on First Nations reserves (that is, stores that operate without approval from community leadership, or a provincial or territorial authorization) and the activities of illicit online sellers (who promote and sell with relative ease to youth and adults).

We also believe that the burden of enforcement should not fall entirely on the police. Health Canada, Public Safety Canada, provincial and territorial regulators and the Canadian public have a role to play in deterring illegal activity. There needs to be more collaboration between regulators and police forces to develop a comprehensive strategy to address illicit activity. Canadians also need information about the broader social harms they unintentionally encourage when they purchase from the illicit market.

Medical access

The legalization of cannabis has had a profound impact on how Canadians access cannabis. However, patients, health care professionals, medical regulatory bodies, municipalities and law enforcement have all voiced concerns about how the system of access to cannabis for medical purposes is working. Many patients are concerned that they do not have reasonable access to cannabis for medical purposes from licensed sellers, while health care professionals and medical regulatory bodies continue to have concerns about the lack of evidence to guide clinical decisions. Municipalities and law enforcement have serious concerns about the abuse of the personal and designated production program, and how cannabis is diverted from this program into the illicit market. We heard that some health care professionals authorizing cannabis for medical purposes accept financial incentives from industry, a practice that would be considered unacceptable in the context of prescription medications.

We see a need to maintain a distinct medical access program, with improvements, to better support patients and to better address the problems caused by bad actors in the personal and designated production program.

We appreciate that there are still significant gaps in the evidence base and recognize that cannabis is not a suitable treatment for all individuals and all health conditions, nor is its use risk-free. At the same time, there is a need to continue to support patients to access cannabis for medical purposes. Clinical guidance is required to increase the knowledge and understanding of health care professionals related to cannabis for medical purposes.

In our view, an important improvement to the medical access regime would be the establishment of an in-person pharmacy access channel. We recognize that establishing a pharmacy access channel cannot happen overnight. It would require regulatory changes from Health Canada and consultation with interested provinces and territories and regulatory authorities for pharmacists. Pharmacy access would have benefits for patients by addressing concerns about delays with mail delivery and product shortages and would allow patients to consult with a pharmacist and discuss potential drug interactions or side effects.

We recognize that Health Canada has made progress in reducing the number of registrations in the personal and designated production program, and the number of plants grown under these registrations. We encourage the department to continue to carefully scrutinize applications and to refuse or revoke those that pose risks to public health and public safety. Limiting the ability of multiple individuals to grow plants at the same site would also reduce the risks associated with this program.

Research and surveillance

Five years after the legalization of cannabis, many critical knowledge gaps remain. Priorities must be set to guide investments in research, helping to fill gaps in the evidence base and guide future policy decisions. We encourage this priority-setting to be done quickly, and for the necessary funding to be made available to support this research.

In addition to research to fill knowledge gaps, there must be continued surveillance of cannabis-related behaviours and cannabis-related health effects.

Looking ahead

Our review fulfills the requirement in section 151.1 of the Act, but the Act refers only to a single review. We believe there should be similar reviews at regular intervals to ensure the impacts of the framework are assessed over time. While mandated reviews of the Act would provide important opportunities to take stock, we also encourage federal, provincial and territorial governments to evaluate their frameworks, including laws, regulations, policies, programs and interventions, on an ongoing basis.

Recommendations

Recommendation 1: The Government of Canada should allocate sufficient funding and resources to ensure the effective implementation of the cannabis framework, including the ability to address emerging public health and public safety issues.

Public health

Recommendation 2: Health Canada should set and monitor targets for reducing youth and young adult cannabis use and cannabis-related harms.

Recommendation 3: Health Canada should redouble its efforts to inform Canadians about the potential risks to children that can arise from accidental exposure to cannabis products (irrespective of the product's origin) and provide advice to consumers on where and how to store cannabis safely.

Recommendation 4: Health Canada should take a leadership role, working in collaboration with provinces and territories, to support the development and implementation of evidence-based school prevention programs and other interventions to reduce the prevalence of youth cannabis use. Federal, provincial and territorial governments should consider committing a portion of cannabis revenues to fund evidence-based public health interventions, including prevention programming for youth and young adults.

Recommendation 5: Health Canada should establish a representative youth advisory board on cannabis to provide a mechanism to engage with youth and young adults on cannabis and related issues. This forum should allow young Canadians to share their knowledge, insights and feedback on cannabis policy, regulatory initiatives and non-regulatory programs that would affect them and their peers.

Recommendation 6: Health Canada should take steps to mitigate the risks associated with cannabis products that contain higher quantities or concentrations of delta-9-tetrahydrocannabinol (THC), including working to establish a definition of higher-potency cannabis products and applying additional health warnings that inform consumers about the elevated risks of these products. We offer a separate recommendation on the use of tax policy to disincentivize the consumption of higher-potency cannabis products. If the current trend towards consuming higher-potency cannabis cannot be halted or reversed, then Health Canada should be ready to implement additional product regulations. To be effective, such regulatory measures should be accompanied by strategies to prevent the illicit market from occupying this market segment.

Recommendation 7: Health Canada should maintain key promotion and plain packaging and labelling requirements, including restrictions on characteristics that are appealing to youth, child-resistant packaging and limits on the use of logos, colours and branding, that are aimed at protecting children and youth, and prohibitions on promotions that imply wellness or lifestyle enhancement.

Recommendation 8: Health Canada should ensure the cannabis industry is provided with clear guidance on the promotion restrictions and packaging and labelling requirements, including correcting misperceptions about what information is, and is not, allowed on product labels (or in cannabis promotions).

Recommendation 9: Health Canada should regularly revise health warning messages to ensure they are appropriate to the product, reflect up-to-date evidence on the health risks associated with cannabis and are impactful in communicating these risks. Additionally, Health Canada should reinstate health warning messages that pertain to serious cannabis-related mental health risks, including psychosis and schizophrenia.

Recommendation 10: Health Canada should revise the packaging and labelling rules that apply to all cannabis products to more clearly convey information on delta-9-tetrahydrocannabinol (THC) and cannabidiol (CBD) quantity or concentration to adult consumers, by simplifying product labels and allowing the display of only "total THC" and "total CBD" for each unit and for the package, and by requiring larger font sizes to display THC and CBD quantity (or concentration).

Recommendation 11: Health Canada should consider allowing some portion of a cannabis package (for dried cannabis and fresh cannabis only) to be transparent, without undermining the intent of plain packaging requirements and other labelling rules to protect children.

Recommendation 12: Health Canada should revise the packaging and labeling rules to allow for the display of certain symbols that convey useful information to the consumer (for example, symbols related to organic certification or recycling), ensuring that permitted symbols do not serve as an inducement to youth or non-consumers.

Recommendation 13: Health Canada should revise packaging and labelling rules to allow the use of QR codes on product labels to convey factual information to consumers, within the constraints of what is currently permitted on labels or in cannabis promotions.

Recommendation 14: Health Canada should develop a "standard dose" or "unit dose" (as appropriate for different classes of cannabis). The development of a standard dose should be prioritized and accompanied by regulatory amendments to require it as an element on cannabis product labels.

Recommendation 15: Health Canada should be vigilant with its regulatory enforcement efforts, with priority given to taking action against regulated parties who do not comply with rules that protect youth and to taking action when regulated parties repeatedly demonstrate non-compliance.

First Nations, Inuit and Métis

Recommendation 16: The Government of Canada, including Indigenous Services Canada, should continue to enhance and expand distinctions-based health, public health and mental health wellness supports, that are culturally appropriate, trauma-informed and in partnership with First Nations, Inuit and Métis communities.

Recommendation 17: We agree with the Standing Senate Committee on Indigenous Peoples that Health Canada and Indigenous Services Canada should work with Indigenous Peoples and communities to establish and fund a research strategy on cannabis and its effects on Indigenous Peoples and communities, recognizing that this research should be led, owned and used by First Nations, Inuit and Métis communities.

Recommendation 18: Health Canada should commit to co-developing culturally appropriate, evidence-based materials and programs to disseminate cannabis-related health information on a distinctions-basis with First Nations, Inuit and Métis.

Recommendation 19: The Government of Canada should take steps to amend the definition of intoxicant in the Indian Act to enable First Nations band councils to enact bylaws regarding cannabis.

Recommendation 20: We agree with the Standing Senate Committee on Indigenous Peoples that the Government of Canada, as it develops legislation in collaboration with the provinces and the territories, and First Nations governments, should establish legislative mechanisms for the enforcement of band bylaws and other laws related to cannabis by all police services, and to ensure that related offences can be investigated and prosecuted effectively.

Recommendation 21: We agree with the Standing Senate Committee on Indigenous Peoples that the Government of Canada should ensure adequate funding and training is available to First Nations communities for the policing and enforcement of band bylaws related to cannabis to better protect public health and public safety. We also encourage the Public Prosecution Service of Canada and other agencies at the provincial and territorial level to support training efforts for prosecutors on the laws of First Nations communities.

Recommendation 22: Health Canada should better advertise and evaluate existing supports for Indigenous licence applicants to determine if they are meeting needs in an effective way. Health Canada should also apply the recommendations we have made on broader measures to support equity-deserving groups and micro-licence applicants and holders to Indigenous applicants.

Recommendation 23: Health Canada should take immediate steps to co-develop, with First Nations, Inuit and Métis, amendments to the Cannabis Act to better protect public health and public safety in Indigenous communities. These amendments should authorize the Minister to enter into nation-to-nation agreements with interested First Nations, Inuit and Métis to control commercial cannabis activities in their communities, when certain minimum standards are met. Over the longer-term, it is our hope that learnings and outcomes from these agreements and other processes could be used to inform the United Nations Declaration on the Rights of Indigenous Peoples implementation work for cannabis.

Recommendation 24: We agree with the Standing Senate Committee on Indigenous Peoples that Finance Canada should work with First Nations to identify options for the development of an excise tax-sharing framework as part of its discussions on fuel, alcohol, cannabis and tobacco taxes.

Recommendation 25: Health Canada should prioritize and accelerate its work on regulatory streamlining to reduce the administrative burden on federal licence holders, while ensuring that the public health and public safety objectives of the Cannabis Act are not compromised.

Recommendation 26: Health Canada should amend the regulations to allow cultivators, including micro-cultivators, to sell packaged and labelled dried or fresh cannabis directly to distributors. Cultivators should be required to follow the same quality assurance and testing requirements for dried cannabis that apply to processors.

Recommendation 27: Finance Canada should consider a review of the excise tax model, recognizing that it was originally designed when the average price of dried cannabis was significantly higher than it is today. Further, Finance Canada should consider making reforms to the excise tax regime that would discourage the consumption of higher-risk cannabis products, for example, by applying progressively larger duties on cannabis products with higher quantities or concentrations of delta-9-tetrahydrocannabinol (THC) (or other intoxicating cannabinoids).

Recommendation 28: Health Canada should be more transparent with the data it holds on the state of the cannabis market and ensure that prospective licence applicants are provided with this information, in sufficient detail, to allow them to assess the feasibility of their business plans based on current market conditions.

Recommendation 29: Health Canada, in consultation with Agriculture and Agri-Food Canada, should establish and support an expert advisory body to conduct a timely review of the regulation of industrial hemp and make recommendations about the most appropriate regulatory framework.

Recommendation 30: Health Canada should carefully examine, and where appropriate revise, its approach to regulatory fees for equity-deserving groups and micro-licence holders. This examination should include an assessment of how regulatory fees could be modified to promote greater diversity among participants in the legal cannabis market.

Recommendation 31: Health Canada should work with relevant departments to ensure that federal licence holders and applicants, particularly small and equity-deserving businesses, are informed of existing programs (such as for grants and loans), incentives and supports that may assist them in establishing and running their businesses. Health Canada should offer post-licensing supports to help these companies navigate regulatory compliance and other business-related responsibilities.

Recommendation 32: The Government of Canada should consider whether offences under the Cannabis Act should be considered under the automatic record sequestration process that will come into force in November 2024.

Recommendation 33: Health Canada should enhance and expand informational materials and educational programs related to cannabis for equity-deserving groups and subpopulations, in partnership with these communities, to ensure they are non-stigmatizing and culturally appropriate.

Recommendation 34: Health Canada should regularly collect and analyze demographic data from licence holders to assess diversity in the industry (including ownership, leadership and the workforce). Health Canada should publish this information in a timely manner to allow the public to monitor the diversity of representation in the industry.

Recommendation 35: The Government of Canada should make substantial improvements in the systematic collection and publication of data related to cannabis that is disaggregated by relevant demographic indicators, such as race. Appropriate data safeguards must be in place to protect privacy and prevent further stigmatization.

Recommendation 36: The Government of Canada should establish indicators related to the environmental impacts of the cannabis industry, collect baseline data and continue to monitor these indicators and their trends. The Government of Canada should publish this information in a timely manner to allow the public to monitor progress.

Recommendation 37: Health Canada should maintain the current limit of 10 milligrams of delta-9-tetrahydrocannabinol (THC) per package in edible cannabis products and continue to develop the research in this area to determine whether there are conditions under which the limit could be raised without unduly impacting public health.

Recommendation 38: Health Canada should provide Canadians who choose to grow cannabis at home with information on the potential risks associated with home cultivation, as well as practical advice on how to grow and store cannabis safely.

Recommendation 39: The Government of Canada should work with provincial and territorial governments to help consumers identify legal retailers and products, especially online, and prioritize public communication on the health risks associated with illicit products.

Recommendation 40: The Government of Canada should consider creating authorities to compel Internet service providers to block illicit cannabis websites and to compel financial service operators to provide financial information that helps identify illicit online operators.

Recommendation 41: In order to provide access and continued support to patients who rely on the medical access program, Health Canada should maintain the program under the Cannabis Regulations , with the improvements set out in this report.

Recommendation 42: To improve patient access to cannabis for medical purposes, Health Canada should permit pharmacies to distribute cannabis products to individuals holding a medical authorization from a health care professional. Provinces and territories and the regulatory authorities for pharmacists should consider supporting this new access channel for patients once federal changes are made.

Recommendation 43: Health Canada should encourage additional research on the therapeutic use of cannabis in Canada, without compromising the frameworks established for the review and authorization of clinical trials and health products. Health Canada should support a transparent process to identify the specific potential therapeutic applications of cannabis that would benefit most from additional study.

Recommendation 44: Health Canada should establish and maintain a knowledge hub that provides up-to-date evidence and information on the use of cannabis for medical purposes for health care professionals and the public.

Recommendation 45: Health Canada, in partnership with provinces, territories, patients and health care professionals, should support the development and dissemination of national clinical guidance documents related to cannabis for medical purposes to increase the knowledge and understanding of health care professionals. These documents should cover issues such as: indications for which there is a sufficient evidence base of effectiveness, how to monitor patients, and how to track and report adverse reactions.

Recommendation 46: Health Canada should prioritize efforts to move beyond a distinct medical access program so that cannabis is considered within standard drug approval pathways and part of conventional medical care. This should start with the rapid advancement of a pathway for cannabis health products containing cannabidiol (CBD). The department should also establish a science advisory committee to review the evidence related to delta-9-tetrahydrocannabinol (THC).

Recommendation 47: To support patient care, Health Canada should amend the regulatory requirements related to the medical document to allow health care professionals to include specific information about the product format and dose of cannabis for the patient, similar to prescriptions for other substances.

Recommendation 48: To address public safety concerns, Health Canada should limit the number of registrations for personal or designated production of cannabis for medical purposes at a single site (where 4 are currently allowed, decrease to 1 registrant per site).

Recommendation 49: Health Canada should build on its recent efforts to seek additional clinical justifications from health care professionals authorizing high daily amounts and consider whether and how additional scrutiny could be applied. Health Canada should use its regulatory authorities to refuse and revoke applications that are deemed to pose a risk to public health or public safety.

Recommendation 50: Finance Canada should review whether the excise tax should be applied to cannabis for medical purposes products.

Recommendation 51: Health Canada, Public Safety Canada, Statistics Canada, the Canadian Institutes of Health Research and other partners should work with stakeholders, including those with lived and living experience and from marginalized communities, to identify key research priorities. This prioritization effort should guide ongoing investment in cannabis-related research.

Recommendation 52: Health Canada, Public Safety Canada, Statistics Canada and other partners should support ongoing surveillance and monitoring activities for cannabis that are responsive to the variety of potential impacts of cannabis and cannabis legalization, including monitoring the state of the cannabis market, social equity impacts and environmental consequences of cannabis legalization.

Recommendation 53: Health Canada should take steps to develop an amendment to the Cannabis Act to mandate periodic independent reviews of the legislation to regularly monitor its impacts. Consideration of the social equity impacts of the legislation should be mandated as an element of future reviews.

Recommendation 54: In addition to regular independent reviews of the Cannabis Act, Health Canada should conduct ongoing evaluation of the cannabis program, and implement any necessary changes.

Observations

Observation 1: Federal, provincial and territorial governments should allocate a portion of cannabis revenues to fund cannabis-related public health and public safety initiatives.

Observation 2: Distributors and retailers should stock cannabis products with diverse ranges of delta-9-tetrahydrocannabinol (THC) quantities or concentrations and take steps to encourage customers to choose lower-THC products whenever appropriate.

Observation 3: Provinces and territories should allow more flexibility in their distribution and retail systems, both through incentives (lower mark-ups, for example) and, for those provinces with publicly-controlled retail, creating space for Indigenous owned and operated retail stores.

Observation 4: Provincial and territorial governments should consider permitting direct-to-consumer sales from smaller cultivators and processors (farmgate, or mail order within a jurisdiction), in a way that allows smaller players to generate and keep more revenue than they would by selling cannabis through distributors.

Observation 5: Provincial and territorial distributors should consider regularly reviewing their mark-ups, fees, purchasing practices and the amount of shelf space they allocate to different products and different licence holders, including those from equity-deserving groups, to improve the prospects for the many smaller-sized companies that are currently struggling.

Observation 6: Law enforcement should focus its efforts on the activities of organized crime and criminal networks, the diversion of cannabis from sites registered for personal and designated production, the proliferation of retail stores on First Nations reserves operating without provincial, territorial or community authorization and illicit online sellers. There is also a role for regulatory authorities to play in combatting the illicit market.

Observation 7: Provincial and territorial governments should consider creating authorities to compel Internet service providers to block illicit cannabis websites and to compel financial service operators to provide financial information that helps identify illicit online operators.

Observation 8: Parliamentarians should consider how the proposed Online Harms Act could be used to protect children and youth from the harms associated with exposure to substances, including cannabis.

Observation 9: Law enforcement should prioritize enforcement of cannabis-impaired driving, supported by appropriate resources and additional training of officers, particularly for rural and remote police services.

Observation 10: The regulators for health care professionals should use their authorities to investigate and sanction health professionals with problematic authorization practices.

Observation 11: Provincial and territorial regulatory authorities should require health care professionals (including physicians, nurse practitioners, and, if applicable, pharmacists) to disclose financial relationships with licence holders. This work could build on existing policies governing health professional relationships with the pharmaceutical industry.

Setting the context for the legislative review

The control framework under the Cannabis Act (the Act) marks a radical departure from a century of prohibition. The decision by Parliament to require an independent review 3 years after the Act's coming into force is an implicit acknowledgement that there would likely be gaps between what Parliament intended to achieve with the legislation and other supporting measures, and the practical implementation of those elements.

In legalizing and regulating cannabis, Parliament opted to replace the regime of prohibition with one based on the protection of public health and public safety. The rationale for this approach was to better protect youth, displace the illicit market and provide adults with a legal source of quality-controlled cannabis. Legalization also results in societal benefits, including lessening the harms of convictions for simple cannabis possession, disrupting the control of cannabis trade by organized crime and minimizing the danger this trade poses to communities, and addressing the health risks associated with using illicit supply. We feel it is important to emphasize that the message of the Act is not that cannabis is harmless, but that Parliament chose an approach based on public health and public safety, rather than prohibition. We believe the focus should remain on the public health (including mental health) and social consequences of regular and heavy use of cannabis, as well as the impact on vulnerable populations.

It has been 5 years since the Act came into force and Canada's experience with this new public health approach to cannabis is still in its early days. Given this, there has been limited time to collect data and evaluate results, and barriers to research remain. These limitations hindered our efforts to assess the impacts of legalization, and they also negatively impact the collective understanding about the potential risks and benefits of cannabis use.

Throughout the review, it became clear that stakeholders have different understandings of the definition and application of "public health" and "public safety". Generally, public health stakeholders were less willing to accept any relaxation of public health controls to transition consumers from the illicit to the legal market. They were primarily focused on public health objectives and accept that certain consumers will continue to purchase from the illicit market. Industry stakeholders, however, were generally of the view that the illicit market poses a significant problem for public health and public safety. They advocated for measures that would attract more consumers to the legal market and greater enforcement against illicit actors. We believe that the current framework is a balanced combination of these perspectives; it implements a range of controls and enables other measures, while also allowing for the sale of a wide variety of cannabis products to adults who choose to use cannabis.

Examining the foundational objectives of the Act

We recognized that the core of the regime, and thus the starting point for this review, is the purpose set out in section 7 of the Act. It sets out that the objectives of the legislation are to protect public health and public safety and, in particular, to:

  • protect the health of young persons by restricting their access to cannabis
  • protect young persons and others from inducements to use cannabis
  • provide for the licit production of cannabis to reduce illicit activities in relation to cannabis
  • deter illicit activities in relation to cannabis through appropriate sanctions and enforcement measures
  • reduce the burden on the criminal justice system in relation to cannabis
  • provide access to a quality-controlled supply of cannabis
  • enhance public awareness of the health risks associated with cannabis use

All the elements of section 7 can be viewed as the means by which the Government of Canada aims to protect public health and public safety. These are the overarching objectives of the Act. We note the specific reference to the protection of the health of young persons.

Section 7 also specifies that providing for a legal supply of cannabis is a means of achieving the public safety objective of reducing illicit activity in relation to cannabis, as well as the public health goal of providing access to a quality-controlled supply of cannabis for those who choose to consume it. The commercial market permitted by the cannabis framework must therefore be viewed in terms of supporting the public health and public safety goals of the Act.

We carefully considered issues related to the sustainability of the legal industry and its ability to provide a quality-controlled supply of cannabis for adults, as well as issues related to social equity and diversity in the industry. However, in formulating our advice on how to better achieve a sustainable cannabis industry, we took care not to compromise the overarching objectives of the Act.

In supporting the objectives of the Act, deterring illegal activity requires both appropriate sanctions (that is, offences and penalties) and enforcement. The Act sets out appropriate sanctions; however, the legislation itself cannot mandate enforcement. Sanctions without effective enforcement risk undermining the objectives of the Act.

Section 7 also notes that an objective is to enhance public awareness of the health risks associated with cannabis use. We feel that such activities require the ongoing provision of information, supported by the best available evidence, as well as prevention initiatives, supported by sustained investment. Improving the awareness of the health risks associated with cannabis for different segments of society is important.

Many risks of cannabis use are well known. For example, there is substantial evidence that early initiation and frequent use of cannabis, especially high-potency products, can lead to addiction, that use during pregnancy is associated with low birth weight and that frequent use and use of high-potency products are associated with the development of schizophrenia or psychosis.

However, there remain very significant knowledge gaps on the risks and benefits of cannabis use. This is also true of the impacts of the new framework, and it may take many years to fully assess its impacts. Section 7 of the Act is silent on the need for continuous research and surveillance. Yet without continued investments in these areas, future efforts to evaluate the impacts of the new approach will be hindered. This is a theme that emerges throughout this report and has led to several of our recommendations.

Finally, we note that section 7 does not include the generation of revenue as an objective of the Act. We agree with the Task Force on Cannabis Legalization and Regulation (a group of experts that advised the Government of Canada on the design of the framework in 2016) that "revenue generation should be a secondary consideration for all governments, with the protection and promotion of public health and safety as the primary goals". Footnote 3 Yet, we note that governments have been the primary beneficiaries of revenue generated from the sale of cannabis.

We believe that Parliament's objectives for the legislation, set out in section 7, will not be achieved without sustained resources.

In preparing this report, we sought to identify key issues and make recommendations in areas where we felt reforms or additional resources were needed. We did not undertake cost analyses or specify the appropriate level of investment or funding. We recognize that in some circumstances difficult decisions will need to be made about when, or the extent to which, our recommendations can be implemented. While some new investments may be required, we encourage all levels of government to consider how existing resources can be redirected, and to consider how cannabis fits into broader priorities (for example, investment in mental health and addictions services, prevention programs, consumer information, and research and surveillance).

We engaged with stakeholders and experts between December 2022 and January 2024 to gather evidence and perspectives related to the areas we were asked to review. We approached stakeholder engagement with humility; we listened and learned from the perspectives shared with us, including those from people with lived and living experience. We acknowledge that barriers exist for many groups in engaging in processes like this review, including historical power imbalances, resource or capacity limitations and access issues. We took measures to address some of these barriers, including offering various modes of participation and making use of trusted interlocutors, such as community leaders and youth advocates, to help facilitate conversations and hear diverse voices.

We hope that we have captured the breadth and nuances of these perspectives and acknowledge that any errors are our own.

Summary of engagement process

We engaged with:

  • researchers and academics in various fields (including public health, public safety, criminal justice and economics)
  • health care professionals, organizations and regulatory authorities
  • people working in the areas of public health and harm reduction
  • youth and youth advocates
  • First Nations, Inuit and Métis (including leaders, governments, community organizations, representatives from National Indigenous Organizations, police and health services, industry members and Elders)
  • the cannabis industry (including federal licence holders, distributors, regulators, retailers and industry associations)
  • equity-deserving groups
  • people with diverse lived and living experience
  • international policy leaders
  • various levels of government
  • law enforcement representatives
  • stakeholders involved in the use of cannabis for medical purposes (including patients and their caregivers, patient advocacy groups, researchers, health care professionals, cannabis clinics and those operating outside of the medical access system)

In our engagement with First Nations, Inuit and Métis, we adopted a distinctions-based approach. Footnote 1 This included tailoring aspects of our discussions to the unique goals and priorities of First Nations, Inuit and Métis, recognizing each has different ways of knowing. We sought to engage at the individual, community, regional and national levels, and were honoured to have been invited to visit some communities in person. We acknowledge that we were only able to meet with a small fraction of nations.

Before we were appointed, Health Canada launched an online engagement process, supported by 2 engagement papers: Taking stock of progress: Cannabis legalization and regulation in Canada and Summary from engagement with First Nations, Inuit and Métis Peoples: The Cannabis Act and its impacts . Health Canada received over 2,100 responses to their online questionnaires and over 200 written submissions. We received a briefing on the results of this online engagement process and were provided access to the submissions received. We thank all those who took the time to submit their views in that process.

Overview of engagement activities

We used a range of methods to conduct our engagement. These activities occurred with stakeholders throughout Canada, through in-person meetings, videoconferences and in a hybrid format. As described in our What We Heard Report , we initially engaged with stakeholders on a one-on-one basis and by sector. This afforded stakeholders the opportunity to provide us with comprehensive perspectives on their key issues.

In total, we:

  • met with over 600 individuals from over 250 organizations in nearly 140 meetings
  • completed 10 sector-based roundtable meetings (public health, justice and public safety, industry, 3 meetings with patients and advocates, 2 meetings with youth and young adult advocates, multi-sectoral roundtable on public health and industry issues, multi-sectoral roundtable on medical access)
  • completed 5 roundtables focused on issues related to diversity, equity and inclusion (women in the industry, issues specific to Black Canadians, social equity issues, harm reduction measures, learnings from other jurisdictions)
  • undertook distinctions-based engagement activities with First Nations, Inuit and Métis (this included meetings with: British Columbia-based First Nations, organized in partnership with the First Nations Leadership Council; representatives of the 4 Inuit regions, organized in partnership with Inuit Tapiriit Kanatami and Pauktuutit Inuit Women of Canada; the Manitoba Métis Federation; the Métis National Council; the Assembly of First Nations; the Anishinabek Nation; the Mohawk Council of Akwesasne; the Mohawk Council of Kahnawà:ke; Samson Cree Nation; Shxwhá:y Village; Six Nations of the Grand River; Tyendinaga [Mohawks of the Bay of Quinte]; Williams Lake First Nation)
  • visited sites of licence holders involved in cultivation and processing, retail stores, harm reduction sites and cannabis clinics
  • engaged with stakeholders operating outside of federal, provincial or territorial licensing frameworks
  • heard from the Students Commission of Canada, which facilitated roundtables with youth on our behalf
  • received over 250 written submissions

A full list of the stakeholders we engaged with is in Appendix B. While significant effort was made to ensure we heard from a broad range of voices, we acknowledge that some viewpoints may be more limited. In keeping with our commitment to those we engaged with, we have not attributed comments to specific individuals or organizations, unless their views are in the public domain or the stakeholder requested it.

We would like to thank everyone who generously gave us their time and energy in sharing their perspectives, whether in writing or in a discussion. We hope that this first review marks the beginning of a continuing review process where diverse groups are engaged regularly to assess the cannabis legislative framework and its implementation.

On October 17, 2018, Canada became the first major developed nation in the world to legalize and regulate cannabis when the  Cannabis Act (the Act) and its regulations came into force. The purpose of the Act is to protect public health and public safety, including by providing access to a quality-controlled supply of cannabis, and by enhancing public awareness of the health risks associated with cannabis use.

The Act recognizes federal, provincial and territorial authorities with respect to the production, distribution and sale of cannabis. These include authorities that enable the Government of Canada (the Minister of Health) to issue licences and permits authorizing activities such as production, import, export and sale. The provinces and territories have all exercised authority over the distribution and sale of cannabis under provincial and territorial law. The Act does not set out authorities related to First Nations, Inuit or Métis governments.

The federal framework

Under the Act, the Government of Canada is responsible for licensing various activities with respect to the production of cannabis (including industrial hemp), including cultivation, processing and testing, as well as associated activities, such as possession, distribution, sale and research with cannabis. The Government of Canada also establishes and oversees compliance with the rules that apply to cultivating and manufacturing cannabis for commercial sale, including:

  • the requirements to obtain a licence (for example, physical and personnel security measures)
  • the types of cannabis products that can be made available for sale
  • the rules that apply to the production and formulation of cannabis products, including mandatory testing requirements and delta-9-tetrahydrocannabinol (THC) quantity or concentration limits
  • the packaging and labelling requirements for cannabis products
  • the tracking requirements that apply to those authorized to produce and sell cannabis to prevent diversion and inversion of cannabis out of or into the legal system

The Government of Canada is also responsible for overseeing a framework to provide access to cannabis for medical purposes under the Act. This framework enables Canadians, including young persons, to access cannabis for their medical needs from commercially-licensed sellers or through personal or designated production.

The Act prohibits the promotion of cannabis, cannabis accessories or related services, except in limited circumstances. Prohibited promotions include those that:

  • are considered appealing to young persons
  • are false, misleading or deceptive
  • are likely to create an erroneous impression about the health effects of cannabis or evoke a positive emotion or image of a way of life (for example, glamour)
  • use sponsorship, testimonials or endorsements
  • depict a person, celebrity, character or an animal

The Act does permit promotion, under specific conditions, to help adult consumers make informed decisions about cannabis. For example, it allows for informational promotion, such as price and availability (that is, information about how it can be obtained), as well as brand-preference promotion (such as promotion on attributes of the cannabis like "sun grown" or "organic"), in material addressed to adults over the age of 18 or in places where youth are not permitted by law.

The Act contains a series of criminal offences and sanctions (for example, ticketing and imprisonment) to deter illicit activity related to cannabis, with exceptions for certain individuals and authorized parties.

Control measures in the Act include:

Restricting youth (people below 18 years of age) from accessing cannabis

  • Prohibiting youth from possessing more than 5 grams of dried cannabis (or its equivalent in other classes of cannabis)

Controlling access to cannabis for adults of legal age

  • Prohibiting individuals and organizations from selling cannabis, unless authorized to do so under the Act
  • Limiting adult possession in public to 30 grams of dried cannabis (or its equivalent in other classes of cannabis)
  • Limiting home cultivation to 4 plants per dwelling-house

Protecting public safety

  • Prohibiting production, distribution and sale, unless authorized
  • Prohibiting distribution and sale to youth
  • Prohibiting import and export, with exceptions for licence holders with a permit and only for a scientific or medical purpose (or in respect of industrial hemp)

The implementation of the Act and its regulations is supported by various activities related to licensing, regulatory compliance and enforcement, criminal enforcement, research and surveillance, and public education, such as:

  • issuing and renewing licences and security clearances
  • promoting and monitoring regulatory compliance, including through risk-based inspections of federal licence holders to determine whether requirements are being met (for example, whether cannabis products have been tested, if appropriate records are kept about production and sale)
  • investigations, charges and court proceedings related to infractions of the criminal offences in the Act
  • monitoring data to identify and track emerging trends and risks (for example, risks posed by new cannabis products)
  • funding research on the public health and public safety impacts of legalization, the therapeutic potential of cannabis, the cannabis plant and its components, and social science research on topics such as stigma, diversity and inclusion
  • providing public education to Canadians to educate and raise awareness of the health and safety risks associated with cannabis use, prevent problematic use and promote informed choices

Other elements of the federal cannabis framework are found in other pieces of legislation, including:

  • Criminal Code : Laws related to impaired driving
  • Excise Act, 2001 : Laws related to the duty payable on cannabis products by federal licence holders

Provincial, territorial and municipal roles and authorities

Provinces and territories are responsible for overseeing the distribution and sale of cannabis within their jurisdictions. They have established a range of distribution and retail models (public, private and hybrid), and must have legislation that subjects authorized sellers to the measures set out in section 69 of the Act . These measures are that the cannabis sold or distributed must be supplied by a federal licence holder, there be no sale to minors, there be appropriate records of their activities and they take adequate measures to protect against diversion of the cannabis to the illicit market.

Provinces and territories have the authority to establish additional controls, such as:

  • increasing the minimum age for adult possession, but not lowering it (all provinces and territories have increased the minimum age to 19, except Alberta where the minimum age is 18 and Quebec where the minimum age is 21)
  • lowering the personal possession limit (no provinces and territories have elected to do this)
  • creating additional rules for growing cannabis at home, such as lowering the number of plants per residence (for example, home cultivation of cannabis is prohibited in Quebec and Manitoba)
  • restricting where adults can consume cannabis, such as in public or in vehicles (all provinces and territories have placed prohibitions or limits on public consumption, with most aligning with their existing rules related to tobacco)
  • limiting access to certain types of products (for example, Quebec has restricted certain types of edible cannabis products)

Local governments and municipalities may develop bylaws on issues such as zoning, public consumption and fire prevention.

While the Act addresses the role and authorities of federal, provincial and territorial governments, there is no similar recognition of First Nations, Inuit and Métis governments. Under other established legislation and authorities (for example, the Indian Act or municipal authorities), some additional laws or requirements can be created (for example, zoning bylaws), provided they do not conflict with the Act.

Social equity considerations

While the framework takes into account societal behaviours and social factors (for example, reducing harms for adult consumers and youth, reducing criminal activity and allowing adult access to quality-controlled cannabis), there are no social equity objectives or explicit measures for marginalized or disadvantaged groups, with the exception of certain flexibilities for licensing applications and supports for Indigenous and Indigenous-affiliated applicants. Footnote 4

Introduction

The framework implemented by the Cannabis Act (the Act) sought to balance multiple objectives, notably to protect public health and public safety while also providing access to a quality-controlled supply of cannabis. In providing their advice to the Government of Canada, the Task Force recognized that a balanced approach was most likely to achieve the government's public policy goals, and that both highly permissive and highly restrictive regimes would lead to health and social harms that would be unacceptable to Canadians.

The framework was designed to minimize the harms associated with cannabis use. A variety of instruments were used to achieve this, including legislative and regulatory controls on issues such as: production practices, product composition, ingredient standards and limits, delta-9-tetrahydrocannabinol (THC) limits, and promotion, packaging and labelling requirements, among others. Footnote 5 , Footnote 6 Non-regulatory tools, including the dissemination of evidence-based information, research and surveillance activities, and financial support for community-based programs, also play important roles in minimizing the harms associated with cannabis use and protecting vulnerable populations.

The legalization of cannabis was a major policy shift in Canada, and the consequences of this change continue to emerge. In view of the ongoing evolution of cannabis use behaviours and the cannabis market, the limited time that has passed since legalization and the shortcomings in the evidence base, we have exercised caution in making our recommendations.

Concerning public health trends

Throughout our review, concerns were raised about the impacts of legalization on Canadian children and youth. Increasing reports of poisonings of children who have unintentionally consumed cannabis are troubling. While pre-legalization fears about increased use by adolescents have not materialized, use has not decreased in the same way that youth smoking and alcohol use have, and cannabis remains easy to access for those under the legal age. Footnote 7

There is a concerning shift toward increased prevalence of cannabis use and increasingly potent cannabis products in the legal market, including dried cannabis, vaping products and infused pre-rolled joints (that is, products with high quantities or concentrations of THC). As well, while the dramatic reductions in the price of cannabis seen over the past 5 years may be driven by economic forces, we worry that lower retail prices will likely contribute to increased consumption of cannabis and elevate the risk of cannabis-related harms (for example, addiction, psychosis, depression, anxiety).

Risks to youth and children

The research is clear that exposure to cannabis can disrupt normal brain development, which continues up to the age of 25. Earlier use and more intensive patterns of cannabis use increase the risk of serious adverse effects. The social and cultural normalization of substances, such as tobacco and alcohol, increases curiosity about these products, lessens the perceived risks and may influence individuals, especially youth, to underestimate their potential harm. Cannabis-related behaviours and perceptions should be monitored across all age groups to ensure that normalization of cannabis use among youth does not become an unintended consequence of legalization. There is a role for the Government of Canada to play in protecting youth from the harms of cannabis by discouraging normalization of cannabis use, fostering informed decision-making and helping youth to develop skills that will better protect them from the early use of substances (including cannabis).

While mass marketing campaigns may help to raise general awareness or provide basic, factual information, efforts to delay the start of cannabis use, and to encourage safer use among those young people that do use cannabis, should be thoroughly evaluated and based on solid evidence. Interventions (such as youth-focused interventions offered in schools relying on both evidence-based content and approaches) can be effective at addressing substance use among youth.

Academic studies and reports demonstrate increases in the number of children being poisoned as a result of accidentally consuming cannabis. Our What We Heard Report summarized several studies, and a more recent article provides updated figures on emergency department visits and hospitalizations for cannabis poisonings among children aged 0 to 11. The study found significant increases in emergency department visits for cannabis-related poisonings between 2015 and 2021 in Ontario and Alberta. Hospitalization data, available from all provinces and territories except Quebec, also showed significant increases in the rate of cannabis-related poisonings, from 0.5 per 100,000 in 2015 to 6.4 per 100,000 in 2021. Footnote 8

We are deeply concerned about this trend. Children should never be able to access cannabis and these poisonings should never occur. In a series of recommendations throughout this report, we emphasize the importance of maintaining key measures that protect children (for example, child-resistant packaging and a prohibition on products that appeal to youth, among others), call for more research in this area and recommend redoubled efforts to educate consumers, including parents and caregivers, about ways to prevent these poisonings. We also call on retailers and provinces and territories to provide information to consumers about how to safely store cannabis in their homes (discussed further in Chapter 9).

Protecting children, youth and young adults from the harms of cannabis

Balancing responsible and informed access to cannabis for adults while prioritizing the protection of youth is critical. We feel that it is important to avoid normalizing or glamorizing cannabis. While most Canadian youth do not use cannabis, a social norm which should be noted, rates of cannabis use among Canadian youth are among the highest in the world, and youth are more vulnerable to cannabis-related harms. While cannabis use among youth has been relatively stable, the 2023 Canadian Cannabis Survey noted an increase in use among youth aged 16 to 19 compared to the previous year (although the result was similar to 2019 and 2020). Footnote 9

To ensure the Government of Canada is clear about its goals, and to reduce cannabis-related harms experienced by youth, Health Canada should establish targets to reduce the prevalence of cannabis use among youth, drawing from lessons learned in tobacco control.

Ongoing monitoring of youth cannabis use, cannabis-related poisonings and other cannabis-related harms is necessary to avoid unintended and undesirable consequences of legalization. To identify important differences in the impact on different subpopulations, monitoring should include collection of disaggregated data and consider a variety of factors (for example, age, sex, gender, sexual orientation, race/ethnicity and types of cannabis products used). To support reductions in youth use and the harms that result from use, the Government of Canada should work with partners and implement a multi-faceted strategy to support prevention, encourage less harmful use and ensure availability of treatment to those that need it. Approaches that aim to reduce cannabis use and harms should include the development and implementation of targeted health interventions that meet the needs of specific populations, and that are responsive to emerging trends. Footnote 10

Addressing accidental exposures to cannabis

There are substantial knowledge gaps about cannabis-related poisonings, including the relative contribution of legal cannabis, homemade cannabis products and illicitly sourced cannabis. Irrespective of where they obtain it, adults must always store cannabis in locations that cannot be accessed by children. We recognize Health Canada has made efforts to inform the public of these risks and to educate consumers on the importance of safe storage, but with the rising number of childhood poisonings, we believe these efforts should be redoubled.

Additionally, we encourage other levels of government, distributors and retailers to also encourage consumers to store cannabis safely.

Informing consumers about the risks associated with cannabis

There is room for improvement in how Health Canada and other authorities disseminate cannabis information, both for youth and for the broader population. Initial federal communications efforts after legalization largely aimed to disseminate information about the legal regime (for example, what was and was not legal and rules on impaired driving and crossing borders), as well as to communicate the health risks of cannabis and how to lower risks associated with consumption (for example, the Lower-Risk Cannabis Use Guidelines published in 2017 and updated in 2021). Footnote 11 , Footnote 12 Health Canada has also supported targeted efforts to reach certain populations (for example, youth and parents), although certain risks (for example, cannabis-related psychosis) and certain populations (for example, people with a family or personal history of mental health disorders) have not received sufficient attention, in our view. Footnote 13

There is an opportunity to refocus these communication efforts by taking a more evidence-based approach to disseminating information on cannabis use and the associated risks and harms. More focus should be placed on the unique interests and needs of different consumer populations. Informational materials and other measures should be co-designed with the intended target group or population to help make the information accessible, relevant and reflective of their needs and lived experiences. Informational and education programs need to be fact-based, non-stigmatizing, culturally sensitive, regularly evaluated and adjusted accordingly.

Emphasizing the need for prevention programs

Providing information about cannabis to the general public, or to certain communities, is necessary but not sufficient. Further research is needed on the most effective ways to increase awareness, inform and educate as part of a broader strategy. Specifically, more research is needed on more intensive interventions like targeted prevention programs (for example, brief, personality-targeted, cognitive-behavioural interventions) and other interventions for frequent consumers and those at risk (for example, screening, referral to treatment). Footnote 14 Such measures also have important roles to play in reducing harms from cannabis at a population level.

We recommend that federal, provincial and territorial governments come together to fund and support the development and implementation of evidence-based school prevention programs and other interventions that equip youth to make better decisions about substance use (including cannabis), to avoid or delay the use of cannabis and other substances, and to engage in lower-risk substance use behaviours. We acknowledge the complexity of implementing these measures, and the need for collaboration and coordination among the educational system, researchers and organizations with expertise in developing, implementing and evaluating these kinds of programs.

Ensuring youth have a voice

We sought the perspectives of youth during our engagement and were impressed by the knowledge and insights that young Canadians shared with us. For example, we heard from youth that there is not enough reliable, unbiased, accessible and accurate information on cannabis that is tailored to them (such as the long-term effects of cannabis use, how it affects people differently and guidance on how cannabis can be used to respond to a medical condition).

Even though youth protection is a key objective of the cannabis framework, Health Canada does not have an established mechanism for engaging youth about cannabis. The Tobacco Youth Leadership Team is a model that could be adopted for cannabis. We encourage Health Canada to prioritize engagement with youth on cannabis, using a Sex and Gender-Based Analysis Plus lens.

Addressing high-potency cannabis products, novel products and their risks

The Act and its regulations permit the production of a wide range of cannabis products to allow the legal industry to innovate and compete with the illicit market. While the Task Force recognized the risks of consuming high-potency products, it ultimately recommended that these products be included as part of the regulated market and be subject to safety and quality-control measures to offer consumers a less harmful choice. The Task Force also noted that production practices for high-potency cannabis concentrates (for example, shatter) in the illicit market often involved toxic and flammable solvents that create risks of fires and explosions. In addition, the Task Force noted that without appropriate safeguards, harmful residues from these solvents could end up being concentrated in the illicit products and consumed. Health Canada regulates how licence holders manufacture such products to mitigate these risks.

The products available in the cannabis market today are different than the products that were used historically in cannabis research or that some groups of consumers may recall using in the past. In addition to increasing quantities or concentrations of THC, there are product innovations (for example, "fast-acting" edible cannabis), newer product formats and changing patterns of use. Products with large amounts of cannabidiol (CBD) are also available. Footnote 15 There are also unknown health risks related to the use of different types of cannabis products, including emissions from smoked and vaped cannabis.

Risks of high-potency cannabis products and novel products

While continued product innovation is expected, there must be recognition of the risks associated with high-potency products and with some novel products, particularly for youth. There has been a shift toward the sale and use of higher-potency cannabis products. For example, the majority of dried cannabis sold contains greater than 20% THC, and high-potency vaping products and infused pre-rolled joints appear to be gaining market share. The use of higher-potency cannabis products is likely to increase exposure to THC, which can increase the risks of adverse mental and physical health effects. Two recent studies (one examining emergency department visits in Ontario, and another examining hospitalizations in Alberta, British Columbia, Ontario and Quebec) describe increases in the rate of health care incidents for cannabis-related psychosis coinciding with the legal sale of additional classes of cannabis products (that is, cannabis extracts, edible cannabis, cannabis topicals) and commercial retail expansion. Footnote 16 , Footnote 17 Additional research is needed to investigate the relationship between the use of higher-potency cannabis products and cannabis-related harms, including psychosis.

We also note that while certain synthetic cannabinoids (for example, spice) are controlled by the Controlled Drugs and Substances Act and not by the Cannabis Act , they could pose a problem in the future and should be monitored.

Interventions to address high-potency products and novel products

We deliberated extensively on the topic of higher-potency cannabis products, taking into account all the evidence available, the data gaps and the differing points of view. Like the Task Force, we had to contemplate the unintended consequences of possible measures, including product regulation to limit THC quantities or concentrations in different cannabis products.

Ultimately, we feel that at this time, the best course of action is a combination of measures that aim to nudge consumers away from higher-potency cannabis products, while supporting research to better characterize the risks associated with these products and their use. First, research on the health effects of high-potency products and novel cannabinoids is necessary to further characterize the health consequences for different subpopulations. Footnote 18 Second, consumers need to be provided with options to choose lower-potency products, and with better information about the risks posed by high-potency products and novel cannabinoids. Third, Health Canada should exercise vigilance in its review of new cannabis product notifications to ensure the current rules are being followed. Finally, if the current trend toward higher-potency cannabis cannot be halted or reversed through labelling, consumer information, price disincentives and moral suasion (discussed below), then more aggressive product regulation should be considered. In Chapter 8, we offer a recommendation to use tax policy to encourage lower-risk cannabis consumption, calling on Finance Canada to consider applying progressively larger duties on cannabis products with higher quantities or concentrations of THC (or other intoxicating cannabinoids).

Advancing research on high-potency and novel products

Determining the appropriate interventions to address high-potency and novel products requires a better understanding of the effects of these products. However, research has not kept pace with the evolution of cannabis products, nor with changes in cannabis-related behaviours. The Government of Canada should provide adequate and ongoing support for research on the health effects of high-potency cannabis products and novel cannabinoids. There are many unknowns about certain cannabinoids (such as intoxicating cannabinoids like cannabinol [CBN] or delta-8-tetrahydrocannabinol), combinations of cannabinoids and formulations that are intended to increase the intoxicating potential of products (such as those that are "fast-acting"). In view of emerging concerns about increased use of higher-potency cannabis products and the corresponding health consequences, it is important that current gaps in knowledge be addressed through timely investment in research.

Providing consumers with information and lower-risk options

Steps should be taken to increase consumer awareness about the potential risks of consuming large quantities of THC, and to assist consumers in making decisions about lower-risk cannabis use. We see merit in establishing an appropriate definition for high-potency products and implementing 1 or more new health warning messages to inform consumers about the elevated risks of these products. Other labelling initiatives, including the establishment of a standard dose discussed later in this chapter, may also help to convey the intoxicating potential of a given product to consumers and nudge consumer behaviour towards lower-potency and lower-risk products. We advise Health Canada to think carefully about the terminology in this area, and in the design of any additional labelling, to avoid any unintended consequences where these measures become a promotional tactic for companies attempting to promote the THC content of their product, or to imply that lower-potency products are "safe".

While Health Canada regulates the production of cannabis, it does not control the purchasing policies of provincial and territorial distributors or the product mix that is made available to adult Canadians in legal retail stores and online. Footnote 19 We appreciate that distributors and retailers aim to meet customer demands; however, we would like to see distributors and retailers take steps to diversify their product offerings to include a greater selection of lower-potency cannabis products. This may nudge consumers to choose lower-potency cannabis products.

Monitoring the introduction of new cannabis products

The federal cannabis compliance and enforcement framework enables surveillance and provides tools to take action to address issues with products already on the market (such as warning letters, public advisories, product recalls, administrative monetary penalties, licence suspensions and licence revocations). There are a number of legislative and regulatory requirements that licence holders are subject to, including restrictions on the use of certain ingredients. However, we believe that Health Canada needs to be more vigilant in monitoring new products and should be ready to implement new controls where necessary to address innovations that increase risks to health. The recent example of companies formulating products with intoxicating cannabinoids other than delta-9-THC is a case in point. Health Canada should determine whether regulatory controls that are currently specific to delta-9 THC (for example, the maximum quantity or concentration of THC in a product) should be modified to include other cannabinoids as well.

Stand ready to introduce product regulation

If the current trend toward higher-potency products and their resulting harms continues, we would encourage Health Canada to examine measures that would place more restrictive limits on the cannabinoid content of legal cannabis products, or to implement additional limitations on the appeal of these products (for example, prohibiting flavours). If additional restrictions are contemplated in the future, Health Canada should recognize that regulatory measures that limit or prohibit consumer access to products that have been legally available may have the unintended consequence of pushing some consumers to the illicit market. To avoid unintended consequences, the introduction of any additional restrictions or prohibitions should be combined with enforcement and education strategies that address the supply of, and demand for, illicit high-potency cannabis products.

Maintaining the majority of promotion, packaging and labelling requirements, while improving certain aspects

In light of the concerning public health trends discussed in this chapter, there is a need to maintain the elements of the framework that protect youth from accessing cannabis, while providing adult consumers with information to make informed decisions.

We believe that the core elements of the framework dealing with promotion, packaging and labelling must be maintained to protect youth and non-consumers.

We acknowledge that there are areas where greater clarity can be provided to the industry about what is allowed, thereby providing more certainty for their promotion, packaging and labelling practices. There are also some adjustments to the regulations related to packaging and labelling that we believe can be made without posing undue risks. We address other potential adjustments to the regulations to reduce regulatory burden in Chapter 8.

Upholding promotion, packaging and labelling controls

The core promotion, packaging and labelling controls (such as limiting promotion to age-restricted environments, requiring plain packaging and prohibiting products that are appealing to youth) should be maintained to prevent inducements to use cannabis, particularly among youth. Footnote 20 Experience with the cannabis framework is limited, and lessons from tobacco suggest that robust controls are needed to protect youth and others from inducements to use addictive, mind-altering substances. While the Government of Canada should always be responsive to new evidence, maintaining the current controls is prudent at this time. In general, the evidence available to us suggested that the current regulations related to promotion, packaging and labelling do not compromise public health and public safety, although some stakeholders raised concerns to us about the use of company names to convey notions of wellness or lifestyle enhancement, which would otherwise be prohibited on product labels or in promotions.

Clarifying current restrictions and requirements

Some of the reforms requested by the cannabis industry on packaging and labelling relate to practices that do not actually contravene the current controls. These include presenting factual information on product labels about the product (for example, that a product was "sun grown" or "hand trimmed"). While changes that increase the appeal to youth or those who do not use cannabis should not be allowed, providing some additional information on a product's characteristics or its origin to people who use cannabis may help to reduce the emphasis on THC quantity or concentration as a marker of quality or value. Health Canada should provide clear guidance to industry on the promotion restrictions and packaging and labelling requirements to allow industry to communicate more effectively with consumers in age-restricted environments and on product packages, resulting in more informed consumer choice.

Improving health warning messages

While the key promotion and packaging and labelling restrictions should be maintained, improvements could be made to product labelling rules to convey health risk information. It is our view that health warning messages that relate to a specific route of consumption (for example, smoking) would be more effective if they appear on products that are consumed in that manner (for example, pre-rolled joints). However, some health warnings could continue to be applied to any cannabis product (for example, messages about the risks of using while pregnant). As well, there are some well-substantiated risks that are not included in the current health warning messages, including the risk of cannabis-induced psychosis and schizophrenia.

Health Canada should update the content of the health warning messages and commit to regularly revising them as new science emerges.

As Health Canada pursues reforms to health warning messages, it should engage with the research community to ensure that the content reflects the latest science, and that the approaches to messaging are as evidence-based, effective and impactful as they can be.

Making information on labels easier to understand

Both public health and industry representatives advocated for changes to the elements of the current framework that might be causing confusion for consumers. The framework lays out a series of requirements that are intended to provide adult cannabis consumers with accurate information on the products they consume. In their current form, the labels of certain cannabis products must display at least 8 numeric values: the quantity or concentration of THC per unit, the "total THC" per unit (taking into account the conversion of THCA into THC), the quantity or concentration of THC per package, the "total THC" per package, and the 4 corresponding values for CBD. Footnote 21 This can be difficult to interpret for some consumers and is an area where simplification may improve comprehension and support healthier decision-making.

Targeted changes to packaging and labelling

Industry representatives advocated for transparent windows in product packages, and on this matter some nuance seems appropriate. While we have great concern about a cut-out window for edible cannabis products (revealing gummies, cookies or brownies to children who might see the package), we do not have the same concern for dried cannabis products. A small cut-out window for dried cannabis products would allow consumers to see the plant material before they purchase the product, which may aid in shifting the perception of high THC quantity or concentration as the primary marker of quality.

Industry stakeholders advocated for regulatory changes that would provide consumers with more information about the product. Such information would need to be consistent with the restrictions and requirements in the Act and the regulations with respect to promotion, packaging and labelling. For example, we received suggestions for regulatory changes that would allow for the use of certain symbols (such as organic certification or recycling) on product labels.

Some latitude in this regard may help reduce the focus on THC quantity or concentration as the primary product characteristic or indication of quality, while providing factual information to consumers.

Industry stakeholders also advocated for the ability to use "QR codes" on product labels. Examples of information that could be accessed via a QR code include: the quantity or concentration of other cannabinoids, terpene profile, analytical testing results and production practices (such as "sun-dried" or "organically grown"). Footnote 22

Some Panel members expressed concern about the potential for QR codes to increase the exposure of youth and non-consumers to promotions. These Panel members were concerned that such a change could lead to unsolicited promotions or online marketing. These members suggested that, if adopted, the outcomes of the change should be closely monitored for unintended consequences and reversed if evaluation suggests any unintended harms.

A majority of the Panel was in favour of the use of QR codes to provide the type of factual information described above as a way to reduce the focus on high THC content as the key characteristic of a cannabis product. They felt that the issue of online targeting of youth or new consumers is a serious one, but that the use of QR codes would not materially contribute to the problem.

Moving toward a standard dose

We also see the need for a simpler way to communicate a "standard dose" or "unit dose" to cannabis consumers, to help convey the amount of a product that should be considered a single serving. This could be an effective nudge for cannabis consumers to move towards lower-risk cannabis use behaviours, through clearer communication and messaging. The concept of a standard dose for cannabis has been elusive for several years due to the complexity of establishing comparable units in different product classes, as well as the large individual differences in how cannabis can be consumed, metabolized and experienced. Nonetheless, this initiative could facilitate additional research on cannabis and its effects. Health Canada should undertake the research and consultation necessary to move forward with the establishment of a standard dose and corresponding labelling requirements.

Enhancing regulatory compliance and enforcement

Another important aspect of labelling is the accuracy of the information presented. Several stakeholders raised concerns about "lab shopping", where claims about the THC quantity or concentration of a product are inflated as part of an effort to appeal to consumers seeking higher levels of THC. While there would be some benefit from additional empirical data to help characterize the extent of the issue, a product should contain, within reasonable variances, what the label says it does. The Act already includes provisions that prohibit false or misleading claims; these measures do not appear to be enforced in the context of inflated claims about THC content. Health Canada should take steps to remedy the issue through regulatory enforcement.

We appreciate the need for product and brand differentiation in a competitive market and believe that some degree of promotion could be beneficial to reduce the focus on THC quantity or concentration as one of the markers of a product's characteristics. Promotional activities that would comply with the current rules and that might be helpful to adult consumers could include in-store displays of information about how products from a particular company were produced (for example, "hand trimmed") or where they were made. Such information could also be displayed on product labels to help adult consumers differentiate between products and brands.

Health Canada explained that it conducts some monitoring of the promotional activities of cannabis licence holders and other regulated parties (for example, authorized retailers), largely based on complaints it receives (for example, lifestyle promotion, promotion that is appealing to youth), and that some compliance and enforcement activities have occurred. But often non-compliance (such as engaging in prohibited promotion practices) results only in warnings without meaningful penalties. Since the department continues to receive information on examples of activities that are non-compliant, this suggests that warnings are not sufficient. We also encountered examples of non-compliant advertising and promotional activity, which raises concern about the effectiveness of the current approach to enforcement. In future, Health Canada should be vigilant and consider more decisive enforcement actions against those engaging in prohibited cannabis promotions, including issuing administrative monetary penalties and revoking the licences of those that repeatedly or egregiously violate promotional restrictions.

No one we met with advocated for promotion outside of age-restricted environments. We feel strongly that age-restriction is a measure that must be maintained. However, there is a marked difference between approaches to verifying age in physical stores and online. It appears that, for the most part, brick-and-mortar retailers are adequately enforcing age requirements.

On the Internet, it is a different story. The current approach to verifying age in most cases (that is, ticking a box to confirm the purchaser is over the age of majority or inputting a date of birth to gain access to a website) is weak and ineffective. While the issue of online age verification is not unique to cannabis, measures should be explored to make it harder for youth to access cannabis websites and social media platforms where cannabis is promoted. Private companies and Crown corporations (that is, distributors and publicly-owned retailers) operating in the legal cannabis market should do more than require "click yes to enter" or "enter a birth date". Examples of age verification strategies include validating identification documents or cross-checking consumer details against third-party data from public databases.

We recognize that there are broader issues involving the protection of minors online, which may warrant attention and collaboration by regulators and enforcement agencies. We also recognize that the most egregious promotions are typically posted by illicit players, and there are challenges associated with finding and identifying unregulated parties. We discuss these matters further in Chapter 10.

Chapter 7: First Nations, Inuit and Métis

We were given a mandate to consult broadly with First Nations, Inuit and Métis on the impacts of cannabis and the Cannabis Act (the Act). We took a distinctions-based approach to our meetings, understanding that each community had specific concerns and experiences related to cannabis and its legalization. Footnote 1 We would like to thank everyone we met with for sharing their time and answering our questions.

We acknowledge that some of the recommendations we are making relate to shared priorities for First Nations, Inuit and Métis, but we emphasize that they should be adopted and implemented through a distinctions-based approach that includes nation-to-nation consultations. We also recognize that some of these recommendations may not be applicable to all communities.

While the Act represents a paradigm shift in the government's approach to cannabis, for many First Nations, Inuit and Métis leaders, it is a reminder of the systemic barriers they face in their dealings with governments. A common theme we heard throughout our consultations was a sense of frustration with the lack of opportunity to provide input into the design of a legislative framework that would have a profound impact on their peoples. While the Act defines the authorities of the federal government and provincial and territorial governments, it is silent on the authority of First Nations, Inuit and Métis governments with respect to cannabis.

First Nations, Inuit and Métis leaders and communities have responded to the public health and public safety concerns related to cannabis and cannabis legalization using the resources, tools and law-making authorities they have at their disposal. These responses range from efforts to fully prohibit cannabis within their territory, to operating within federal, provincial and territorial legislative frameworks, to establishing their own laws and governing bodies to oversee production and retail sale, consistent with their expression of their inherent rights and sovereignty.

In developing our advice, we considered the recommendations of the Standing Senate Committee on Indigenous Peoples (the Standing Senate Committee) report On the Outside Looking In: The Implementation of the Cannabis Act and its effects on Indigenous Peoples and have included reference to them where applicable. We also considered findings from Health Canada's Summary from engagement with First Nations, Inuit and Métis Peoples : The Cannabis Act and its impacts .

Our overall assessment is that there are significant gaps in the cannabis framework that negatively impact the public health, public safety and equitable treatment of Indigenous communities and individuals.

We heard concerns from Indigenous leadership about the absence of any authority in the Act for Indigenous communities to govern activities relating to cannabis in their communities. Other issues raised by First Nations, Inuit and Métis Peoples include:

  • insufficient and outdated research on the impact of cannabis on First Nations, Inuit and Métis
  • lack of investment in culturally appropriate public health interventions (for example, harm reduction, mental health and prevention) and in culturally appropriate information about cannabis
  • the proliferation of unauthorized retail stores in some First Nations communities (that is, stores operating without approval from community leadership, or without provincial or territorial authorization)
  • inadequate ability to address criminal activity in communities
  • barriers to participating in the legal cannabis market

We understand that issues related to cannabis legalization and the control of cannabis-related activities are linked to broader issues of self-determination and reconciliation. We also recognize the Government of Canada has made a commitment through the United Nations Declaration on the Rights of Indigenous Peoples Act to take measures to ensure the laws of Canada are consistent with the United Nations Declaration on the Rights of Indigenous Peoples . Over the long-term, we expect the broader effort to implement the Declaration to include consideration of cannabis and resolve what self-determination means in the context of cannabis. This will be important work, and we encourage public health and public safety considerations to be at the forefront. This work may lead to significant changes; in the meantime, action is needed now to help communities address the situation on the ground.

Given this context and the public health and public safety challenges that are present in Indigenous communities, notably First Nations communities, it is clear to us that changes are required. We also see these changes, and others, as providing better opportunity to support participation in the legal market, and thus economic development in communities.

This chapter makes recommendations that aim to improve outcomes in 3 areas: health (including public health and mental health); public safety and law enforcement; and economic participation.

Our recommendations depend on appropriate resources being in place to be effective. Interested First Nations, Inuit and Métis should have the funding necessary to be full partners in working to make the recommended amendments to the Act and to build the capacity to take on the responsibility of overseeing commercial cannabis activities in their communities, alongside supports for public health interventions and police services, to better protect public health and public safety.

Investing in health, public health and mental health supports, and research

There are already significant demands on health, public health and mental health services in many First Nations, Inuit and Métis communities. We acknowledge that the capacity and resource issues in these areas are broader than the scope of our review; however, they cannot be disregarded as they are interconnected with cannabis legalization.

Many communities are dealing with a multitude of health and public health challenges, including mental health issues, polysubstance use and problematic substance use (including the use of cannabis). In addition, experiences of discrimination, racism and intergenerational trauma arising from Canada's history of colonialism continue to affect the health of First Nations, Inuit and Métis. These challenges require an integrated approach to provide effective health services that are culturally appropriate and trauma-informed, including prevention interventions and treatment supports. Footnote 23

Supporting the development of distinctions-based, culturally appropriate research and health information

We understand that many communities are seeking more resources and supports to lead their own research and surveillance activities, as the Standing Senate Committee also noted. We recommend that research about the impacts and effects of cannabis and legalization on First Nations, Inuit and Métis be Indigenous-led. The research must reflect the priorities of First Nations, Inuit and Métis communities and recognize data sovereignty and ownership.

Distinctions-based, culturally appropriate cannabis information and education efforts are critical, and must consider the knowledge and experience that exists in communities . Generic public information materials are often not reflective of the reality in First Nations, Inuit and Métis communities, nor based on evidence or data that included adequate First Nations, Inuit and Métis representation.

Some First Nations, Inuit and Métis organizations have developed their own culturally appropriate public information material. For example, Pauktuutit Inuit Women of Canada published Let's Talk About Ujarak: a Cannabis Harm Reduction Toolkit , which was guided by Inuit values and created to help Inuit increase their knowledge about cannabis use and how to reduce harms. These types of resources are important and needed; Health Canada should commit to co-developing them on a distinctions-basis with First Nations, Inuit and Métis.

The Manitoba Métis Federation indicated that their priorities continue to be focused on the protection of public health and public safety. We heard very clearly that research, education and interventions for Red River Métis must always be Métis-specific and developed and informed by consultations with communities.

Defining cannabis as an "intoxicant"

An important element in giving communities control over public health and public safety is the opportunity to prohibit the possession or sale of cannabis for non-medical purposes. While the Indian Act allows First Nations governments to ban alcohol, this is not the case for cannabis. This could be remedied with a simple amendment to the definition of "intoxicant" in the Indian Act.

Community public safety and enforcement

The rise in cannabis retail stores not sanctioned by communities operating on Indigenous land, largely First Nation reserves, is a significant problem. We heard and saw first-hand how these stores, some of which we understand are supported by criminal organizations from outside the community, have taken advantage of the jurisdictional complexity associated with legalization to operate against community wishes and without any protection for public health and public safety. These stores sell products that do not comply with product, packaging or labelling rules, creating public health risks for both residents of the community and those from outside the community who purchase the products. Community leadership also told us that these stores present significant public safety challenges, given the amount of cash involved on site and the actors who support the operation of the stores.

It must be emphasized that these unauthorized stores are different than stores that are sanctioned by community leadership. Stores sanctioned by the community may be operating outside of the provincial or territorial frameworks, but we understand that in these cases, the communities largely have the same public health and public safety objectives as in the Act . We saw several examples of community laws that articulate this commitment to public health and public safety and heard from some communities about the steps they have taken to set up licensing and oversight bodies. From our perspective, the real concern is retail outlets on Indigenous territories that are operating without any authorization and that may be affiliated with organized crime groups.

While communities are often supportive of enforcement actions being taken to disrupt unsanctioned, illicit operations on reserve, police actions have been limited. Given the large number of these stores in some communities, First Nations community leadership expressed fears about the prospect of never seeing change. They noted that their own police services do not have the capacity to tackle the problem and that there needs to be more assistance from and coordination with other police services such as the Royal Canadian Mounted Police or provincial police services. As a result, public health and public safety risks continue to grow unchecked.

Support for enforcement

We believe that recognition of community authority to control cannabis activities would help to address this challenge, since it would draw a clear line between authorized and unauthorized activities and provide clarity for enforcement purposes. We also recognize that First Nations police services must contend with many priorities, similar to other police services. They also face the challenge of operating in a context of time-limited and insufficient funding, as well as more limited access to training and other supports. Inadequate resourcing and training of First Nations police services is not restricted to enforcement of the Act. However, the lack of progress in this area negatively impacts public safety in First Nations communities.

We also note the recommendation from the Standing Senate Committee that the Royal Canadian Mounted Police provide dedicated space for First Nations police services to undertake Drug Recognition Expert Training, and that Public Safety Canada provide additional funding to First Nations to support this work to address cannabis-impaired driving.

Where First Nations communities do not have their own police services, we believe there should be further training for the non-Indigenous police services in relation to First Nations community laws and bylaws to better support their enforcement. We encourage these police services to prioritize building relationships with the First Nations communities within the territories where they work.

Longstanding challenges to public safety in Indigenous communities will require sustained attention by all governments and the development of strategies in collaboration with Indigenous leadership. They include training and capacity building for community police services, better coordination with non-Indigenous police services and with Crown prosecutors, and greater priority given by all governments to public safety in Indigenous communities. All of these issues need to be addressed; failing to do so will mean there is unlikely to be any improvement in public safety generally, nor specifically in relation to criminal activity with cannabis.

Economic participation

Throughout our discussions, many First Nations representatives expressed disappointment in the lack of opportunity to participate in the legal cannabis industry, noting that governments missed an opportunity to advance economic reconciliation by bringing jobs and tax revenue to communities.

We heard from many First Nations leaders and entrepreneurs and some Métis individuals who are interested in participating in the cannabis industry. Some view the ability to have commercial cannabis activity within communities as an important element of economic reconciliation and a means to create a more equitable industry. Others felt that the establishment of legitimate retail outlets would help counter the proliferation of illicit operations in their communities, many of which have links to organized crime.

We believe there are 2 approaches to improve economic participation. First, more support should be provided for those interested and willing to participate in the existing licensing frameworks. There should also be authority under the Act for nation-to-nation agreements that would provide greater community control of commercial activities with cannabis. This second approach would require the Government of Canada to collaborate and co-develop these legislative amendments with First Nations, Inuit and Métis, with the aim of enabling agreements that provide for Indigenous government authority. This would require agreement on requirements or standards that protect public health and public safety. This work would also require the parties to answer important questions including: the degree of harmonization between federal, provincial and territorial requirements and Indigenous government laws, responsibility for enforcement of Indigenous laws and how to best address illegal activity that harms Indigenous communities.

Economic participation in cannabis production via federal licensing

Some communities have made the decision to participate in the framework under the Act and acquire federal licences to produce cannabis. As of September 2023, there were a total of 907 licence holders authorized to cultivate or process cannabis, of which 50 (6%) were self-identified Indigenous licence holders. Footnote 24 However, similar to others in the industry, Indigenous entrepreneurs and leaders told us there are many barriers that impede them from successfully participating in the legal industry as federal licence holders. These issues include:

  • financial barriers to entering the legal industry, including difficulties in accessing capital to build a site
  • competition from the illicit market
  • regulatory burden of information requested by Health Canada and the Canada Revenue Agency related to licensing and excise tax licensing
  • issues related to accessing basic business services, such as banking and insurance
  • challenges selling product to provincial and territorial distributors (for example, volume requirements from distributors, reliance on competitors to sell product to distributors and restrictions on cultivators from selling dried cannabis directly to distributors)

Health Canada must take immediate steps to address these issues to better support those who wish to participate in the federal framework. Chapter 8 lays out a series of recommendations that could apply to Indigenous federal licence holders. These include possible revisions to regulatory fees charged to equity-deserving licence holders and micro-licence holders, providing these applicants with information on grants, loans and other programs that may be available to them, and offering post-licensing supports to help them navigate regulatory compliance and other business responsibilities.

We note that Health Canada provides certain services to support Indigenous applicants in navigating the licensing process under the Act, including a Navigator Service, a Licensing Advisor and a 2-stage review process. We understand that the Navigator Service, which supports general inquiries about licensing, has helped nearly 170 self-identified Indigenous-affiliated commercial licence applicants since 2017, while the Licensing Advisor, who provides more detailed application development support, has only had 2 clients. Footnote 25 The 2-stage review process allows Indigenous and Indigenous-affiliated applicants to have their applications reviewed before requiring a built site (which is a requirement for all other applicants). This allows for early feedback on an application and is intended to help facilitate access to capital to finance site construction.

Economic participation in distribution and retail

As noted in our What We Heard Report , a February 2023 article in an industry periodical suggested that less than 1% (24 of more than 3,300) of the provincially or territorially authorized retail stores were operating on First Nations reserves. Footnote 26

We heard from some communities that they are interested in obtaining provincial or territorial licences to operate retail stores. British Columbia, Ontario, Quebec and Saskatchewan have enacted legislation that provides authority for the government to enter into agreements with First Nations to sell cannabis on their territories. However, as the Standing Senate Committee report points out, some First Nations expressed concerns that participating in provincial licensing regimes can be costly. We also learned from some communities that there are inadequate incentives to enter into such agreements (for example, they do not get any discounts on licensing fees or product mark-ups) and that they are still required to participate in a provincial licensing process (Saskatchewan's legislation is the exception, as it allows First Nations to establish their own licensing regimes).

In provinces and territories where there is public control of retail sale, there appears to be less progress towards arrangements for First Nations retail. As an example, a First Nations community in Quebec expressed concern that if the provincial government does not provide regulated retail access to community members, illicit sales will proliferate, along with the attendant harms from illicit products (that is, products that do not comply with the product, packaging and labelling rules posing health risks and the potential for more dangerous criminal activity posing public safety risks).

Indigenous jurisdiction and control of cannabis activities in Indigenous communities

There is no one-size-fits-all approach. As noted above, some communities simply want the authority to prohibit activities related to cannabis for non-medical purposes in their communities, including prohibiting commercial activities. Others are prepared to work within federal and provincial and territorial frameworks. Some want to assert full control.

Certain communities have created their own cannabis frameworks, including their own cannabis laws. We understand that these generally reflect the public health and public safety requirements and product standards found in federal, provincial or territorial laws. We reviewed some examples, including from Six Nations of the Grand River and the Mohawk Council of Akwesasne. Some of these communities have developed their cannabis frameworks as an assertion of their inherent rights and reject the need for federal, provincial or territorial licences. Others have done so due to provincial or territorial unwillingness to authorize retail stores in their communities.

Despite being lawful from the community's perspective, the lack of recognition of First Nations, Inuit and Métis authority under the Act means that production and sale activities conducted pursuant to these, or other, community laws are not legal under the Act and may result in legal challenges for those engaging in them.

Notwithstanding the desire of these communities to protect public health and public safety, there are questions about the quality of the products being sold and the health risks they might pose (for example, being contaminated with pesticides), given that community-sanctioned retail stores cannot access cannabis from federal licence holders or testing from licensed analytical testing companies. The lack of recognition of First Nations authority also limits the ability of the communities and entrepreneurs involved to be recognized as legitimate businesses by banks, insurance companies and others. We believe that these public health and public safety issues, and others, can be better addressed by providing for greater Indigenous community control under the Act.

Providing for greater Indigenous community control under the Cannabis Act

The issue of bringing the Act into compliance with the United Nations Declaration on the Rights of Indigenous Peoples needs to be addressed, but this will take time. However, there are pressing public health, public safety and economic equity reasons for acting now to provide more control to Indigenous communities over economic activities involving cannabis. This would require amendments to the Act to create a viable pathway for interested First Nations, Inuit and Métis communities to assume more control over commercial cannabis activities. This work would need to include a process to develop, with First Nations, Inuit and Métis, requirements or minimum standards to protect public health and public safety (for example, the types of products that could be made and sold, the testing standards for cannabis products, the minimum age to purchase cannabis and measures to protect against diversion to the illicit market). One of the issues to be determined is what role the provincial and territorial governments would have with respect to the development of these standards.

One promising approach is that taken by the Government of Saskatchewan. In 2023, it amended its Cannabis Control (Saskatchewan) Act to create a legal framework for First Nations in Saskatchewan to licence and regulate the distribution and retail sale of cannabis on reserve. By having an agreement with the provincial cannabis authority, a First Nations cannabis authority can issue permits for the sale and distribution of cannabis on reserve, including charging fees and setting terms and conditions for permittees. The Saskatchewan legislation sets out mandatory requirements for these permits (including that the cannabis sold or distributed must be supplied by a federal licence holder, that there be no sale to minors, that there be appropriate records of their activities and that they take adequate measures to protect against diversion of the cannabis to the illicit market). We note these are the same measures set out in section 69 of the Cannabis Act that provinces and territories must apply to authorized sellers. We encourage Health Canada and Indigenous leadership to review the agreements implemented as a result of this legislative change in Saskatchewan. As this is a cannabis-specific development, it may prove useful as a positive step to provide greater control.

Recent federal legislation on child welfare and on drinking water, co-developed with First Nations, Inuit and Métis and which address recognition of Indigenous authority and rights, are examples that could be useful for considering how to address cannabis in the context of the United Nations Declaration on the Rights of Indigenous Peoples . Footnote 27 , Footnote 28 A recent decision by the Supreme Court of Canada upheld the constitutionality of the child welfare legislation, and noted that the effort to "braid" together the legislative authority of Indigenous Peoples, the international standards in the Declaration and the provisions enacted by Parliament on national standards or principles provided "a framework for reconciliation when it comes to Indigenous child and family services, in the spirit of the Declaration". Footnote 29

The Supreme Court's language on the development of the national standards or principles in relation to child welfare has resonance when it comes to thinking of an approach to developing public health and public safety standards for cannabis in the context of nation-to-nation agreements. The Court makes it clear that Parliament's intention with respect to national standards was not to impose them unilaterally, without regard to the perspectives of Indigenous groups, communities or peoples. Rather, it said the Government of Canada committed to engaging with Indigenous peoples and provincial governments to support a comprehensive reform of child and family services that are provided in relation to Indigenous children.

Taxation and revenue sharing

The question of authority over taxation was one that the Standing Senate Committee heard about, and an issue that arose repeatedly in our engagement with Indigenous communities, particularly First Nations communities, who also shared a variety of preferred approaches. The range of positions is captured in Chapter 7 of our What We Heard Report : "While select First Nations governments have negotiated agreements to allow them to control the sale of cannabis, they are still required to collect sales tax for other levels of government. Many continue to advocate for arrangements in which they would receive all, or a share of, cannabis sales and excise tax revenues generated from within their communities in order for the revenues to be reinvested. Some seek tax-sharing agreements with federal or provincial and territorial governments, while others seek amendments to tax laws to provide opportunities for interested First Nations to levy their own cannabis excise tax in their communities. Many argue that federal or provincial and territorial sales tax revenue should be directed back into their communities."

Successful implementation of the cannabis control framework depends on many factors, including a reliable supply of regulated, quality-controlled cannabis. While the Cannabis Act (the Act) does not explicitly list ensuring the viability of the industry as an objective, the commercial production model implemented via the Act relies on financially viable private sector participants to supply the legal cannabis market.

Throughout our review, industry representatives raised urgent concerns about their financial viability in the current highly competitive market. We believe these concerns are well-founded; however, we are of the view that efforts to support the industry need to be done in a manner consistent with the overarching public health and public safety objectives of the Act.

Notwithstanding the difficulties faced by individual licence holders, experience to date suggests that, overall, the market share of legal cannabis has increased substantially over time and compares favourably with U.S. states that have legalized cannabis. Displacement of the illicit market is discussed further in Chapter 10. There are a wide variety of legal cannabis products available through retail stores and websites. While there are price differences between legal and illicit cannabis, and displacement of the illicit market differs regionally, the data available to us suggests that the gap has narrowed, and cannabis consumers are increasingly acquiring cannabis from legal sources.

Creating economic conditions for a viable cannabis industry

Challenges for smaller licence holders.

Cannabis is not like other products; a large illicit cannabis market existed in Canada before legalization, and that history, and the people that were part of it, must be factored into the continued implementation of the Act. Through the cannabis framework, the Government of Canada sought to encourage a diverse, competitive market, with smaller and larger players distributed across the country. We understand that through the creation of "micro" class licences and other measures, the federal government had hoped to facilitate the transition of individuals who had been involved in illicit cannabis production (but without links to organized crime or histories of violent criminal activity) into the legal cannabis market. Footnote 30

In principle, small-scale cultivators and processors distributed throughout the country could increase consumer access to a greater variety of cannabis products (for example, "craft" products manufactured by small, local businesses, more opportunities for innovation). In practice, however, the majority of micro-class licence holders appear to be struggling to gain a foothold in the legal market.

It will be very challenging for smaller companies to succeed without some government intervention and measures that provide some specific advantages or flexibilities. Over the last 18 months, we met many people from the cannabis industry who exhibited an obvious passion about the quality of their product and a clear desire to participate in the legal industry. In the best-case scenario, the legal market might provide these individuals with an opportunity to find a niche for themselves and their businesses. But we fear it currently does not. If barriers to success are not addressed, many small legacy producers will see no advantage to joining the legal market, and some of those who have done so may decide to return to the illicit market.

Current market conditions

Cannabis companies of all sizes are struggling. The last 5 years have been a tumultuous period for participants in the legal cannabis market. The market today is crowded, and production capacity greatly exceeds demand. Without material changes in the economic conditions, it is reasonable to anticipate that some portion of the current cannabis businesses will continue to downsize or cease operations. Depending on the extent of this shift, the diversity of cannabis products offered in the legal market may decrease while prices may increase.

It is clear that excess production and over-supply have contributed to decreased wholesale prices (that is, the price paid by provincial and territorial distributors to licensed processors). Canada has among the lowest cannabis prices in the world. Low prices have economic consequences for participants in the legal market as well as health consequences for consumers. There is concern that a market with abundant, cheap cannabis will likely contribute to increased cannabis consumption and exacerbate the negative public health impacts.

Over-supply is not the only issue. In the current model, there are many sellers (that is, licensed processors) and few buyers (that is, distributors). Provincial and territorial distributors hold a great deal of influence over the success of prospective suppliers, as they are the main purchasers of cannabis. Provincial and territorial distributors must make choices about how they operate, and in most jurisdictions they have exercised their monopsony power (that is, being the sole buyer in a market) in a way that we see as detrimental to those licensed by Health Canada to make and sell cannabis. This scenario, where provincial and territorial distributors can dictate terms, often leads to adverse effects, including lower prices for cannabis producers, reduced incentives for innovation and an overall imbalance in the bargaining power between distributors and producers.

That said, we recognize that distributors cannot reasonably purchase cannabis from every company that has a product to sell. The large number of cannabis licence holders vying for market share also contributes to the challenges being experienced by those operating in the legal market. Consolidation may lead to business failures, investment losses and job losses, which are all regrettable for those affected.

Our review of the Act reflects a particular point in time in a market that is continuing to evolve. We encourage the Government of Canada and its provincial and territorial partners to closely monitor the financial health of the cannabis sector. The Cannabis Industry Forum established by Innovation, Science and Economic Development Canada may provide an important venue for continued discussion of the factors affecting the viability of the legal cannabis market. As the market and consumption patterns continue to change, the framework will need to evolve to keep pace.

At the present time, Canadians spend more than $5 billion per year on legal cannabis. Footnote 31 This level of revenue should be sufficient to support a robust domestic market, albeit with no guarantees that every company that chooses to enter the market will be viable. Currently, cannabis revenues are not divided in a way that allows licensed cultivators and processors to be consistently profitable. In particular, smaller licence holders appear to be struggling as they cannot compete with larger companies on price and have less ability to secure shelf space with provincial and territorial distributors (who often look for large quantities of product).

Reducing regulatory burden on industry

Health Canada can, for its part, reduce the financial and administrative burden it places on participants in the legal industry. The department recently consulted on potential regulatory streamlining. If implemented, this initiative would have benefits in reducing the costs of compliance for licence holders and the regulatory costs Health Canada seeks to recover through fees charged to licence holders. As Health Canada and the regulated industry have gained experience with the framework, it appears to us that there is room to relax or update certain regulatory requirements without compromising public health or public safety.

For example, we suggest that current personnel security requirements might not be needed for some types of employees, some controls related to physical security may not be essential (such as visual monitoring of areas not in use), and some record-keeping and reporting requirements could be streamlined (such as harmonizing reporting between Health Canada and the Canada Revenue Agency to avoid duplication, reducing the reporting burden for some lower-risk activities such as waste and destruction, and reducing the length of time required to store certain records, especially visual records). Footnote 32

Measures to support cultivators and processors

Cultivators are currently not permitted to sell cannabis directly to provincial and territorial distributors. Rather, they must engage a processor to package and label the cannabis. As part of the regulatory streamlining amendments, we advise Health Canada to allow companies holding a cultivation licence to sell dried or fresh cannabis (that complies with all requirements for packaging, labelling and quality control) directly to distributors. We feel that this is within the spirit and intent of the cultivation licence class; it would also remove an unnecessary step in the supply chain.

Reforms at the provincial and territorial level that accommodate additional direct-to-consumer sales outside of the physical retail environment may create opportunities for smaller cannabis cultivators and processors to establish a niche for their products and generate revenue. While assessing distribution and retail sale is beyond the scope of our review, we note how important direct-to-consumer sales are for craft breweries. To have a positive impact, we believe any province or territory that sees benefit in allowing direct-to-consumer sales (for example, farmgate programs, or mail order within a province or territory) would also need to allow cultivators and processors to retain a larger share of revenue (for example, reducing or eliminating mark-ups and fees). Footnote 33 Jurisdictions exploring direct-to-consumer sales should consider whether and how these programs could be targeted so that they support independent micro-scale licence holders (sometimes referred to as "craft" producers) and equity-deserving groups, to promote the market diversity that was envisioned at the time of legalization.

There is also an opportunity for provincial and territorial distributors to reserve space for and highlight products from small licence holders and those from companies owned by members of equity-deserving groups. We are aware of some initiatives of this nature (for example, British Columbia's Indigenous Shelf Space program) and think additional ones could be important to sustaining diversity in the legal cannabis market.

Excise tax structure

Industry players concerned about their own viability have called on the Government of Canada to reform the excise tax regime. Footnote 34 In particular, they are seeking relief from the minimum duty of 10% or $1 per gram, whichever is greater, on dried or fresh cannabis (as well as plants and seeds). Some industry players called for reform because the excise tax formula was set at a time when the price was much higher than it is today. Footnote 35 At current cannabis prices, the excise tax is a substantial burden. Industry representatives also questioned whether the excise tax is serving its intended purpose of moderating consumption, given that licence holders are largely bearing the cost rather than passing it on to the consumer.

The challenge of designing an effective tax regime under the highly competitive market conditions that exist today is that any reductions in the excise tax on dried cannabis would likely translate to reductions in the wholesale price (that is, the price paid to licence holders by provincial and territorial distributors) and the retail price (that is, the price paid by consumers). Given the priority we place on the protection of public health, we would not want to see further reductions in the retail price of dried cannabis in the legal market, nor would we want any changes to make it more attractive to purchase products in the illicit market. Any redesign of the excise tax framework for cannabis should keep these considerations in mind and will need to be evaluated regularly and adjusted depending on how the market reacts.

Addressing potency through a progressive tax

There is a trend in market data that is troubling from a public health perspective. It appears that more and more consumers are purchasing cannabis products with increasingly higher quantities or concentrations of delta-9-tetrahydrocannabinol (THC). Researchers and industry representatives told us that restrictions on labelling and promotion have led consumers to fixate on THC content as a marker of quality or value. Elsewhere in this report (Chapter 6) we outline recommendations to clarify the information that should be permitted on labels and in promotions and for targeted regulatory reforms that would allow licence holders to communicate factual information about their products. While we hope this nudges consumer behaviour and reduces the emphasis on THC, we also encourage Finance Canada to consider developing a progressive excise tax regime for all cannabis products that increases the amount of tax owed based on the quantity or concentration of THC (or other intoxicating cannabinoids). Products with lower quantities of THC should have less tax.

An ideal regime would disincentivize the manufacturing and sale of higher-risk products and incentivize the production of lower-risk cannabis products. For a reform of this type to disrupt the current trend toward higher-potency products, relatively higher taxes on higher-risk products would need to translate to higher retail prices; it would be ineffective if companies simply absorbed the added cost from the higher tax. Distributors would also have to pay more for higher-risk products, as would consumers. If this model were to be implemented, there would be a need for a monitoring mechanism to examine the extent to which consumers are moving to the illicit market to purchase lower-priced products. Such monitoring should also consider any impacts on the purchasing and consumption behaviour of youth and other population subgroups.

Improving transparency

The federal licensing program has resulted in an over-supply of cannabis in Canada and concerns about the financial viability of many licence holders. As of September 2023, 907 companies held federal licences for cultivation and processing. Footnote 36 While we understand the Minister of Health has the authority to place a limit on the number of licences issued, we heard little support for this kind of intervention. Such a measure could also lead to unintended consequences (for example, discouraging geographic and demographic diversity in the legal cannabis market). However, Health Canada should continue to closely monitor the state of the legal cannabis industry.

Licence applicants and licence holders would benefit from greater transparency about the state of the cannabis market. Health Canada should provide prospective licence applicants with data that would enable them to make informed decisions about the feasibility of entering the market.

There are other measures that Health Canada could take if over-supply threatens the viability of the industry (for example, production limits on standard class licences). However, this type of measure should be contemplated only after full consultation and consideration of any unintended consequences.

Reviewing the regulation of industrial hemp

Industrial hemp (that is, varieties of cannabis with 0.3% THC or less in their leaves and flowers) is also regulated under the Act. Representatives of the industrial hemp industry noted that while cannabis and hemp come from the same plant family, the products that result from their cultivation are entirely different and carry very different risks. They told us that the industrial hemp industry in Canada has been negatively impacted by the legalization of cannabis, with less industrial hemp production and sales today than in 2017. They advocated for a new approach to the regulation of industrial hemp that sees it treated as an agricultural commodity, with changes that would increase the maximum allowable limit of THC in industrial hemp and associated derivatives. The industry also raised other issues related to potential uses of industrial hemp (including industrial hemp-derived cannabinoids or biomass). Footnote 37

We did not have an opportunity to delve deeply into the regulation of industrial hemp, but we recognize this is a topic that deserves careful and detailed consideration.

Building social equity into the framework

While the Act does not contain any explicit social equity objectives, the Ministers broadened the scope of our review to include some social equity considerations. Clearly there were wide-reaching social impacts from the prohibition of cannabis and the discrimination experienced by some groups in the criminal justice system. In addition, we heard concerns about how the current regime has led to under-representation of equity-deserving communities in the cannabis industry and a lack of economic opportunities for some.

Researchers at the Centre on Drug Policy Evaluation recently published a report that reviews evidence and best practices in social equity from other jurisdictions with legal cannabis markets; we encourage policymakers to examine their report, A Roadmap for Cannabis Equity in Canada to Inform the Legislated Review of the Cannabis Act .

In our consultations, many equity-deserving individuals described how the legal cannabis industry is not inclusive. They expressed frustration about the barriers faced by entrepreneurs from their communities and the obstacles confronting community members already in the industry, including challenges with financing (such as raising affordable capital) due to current and historical discrimination.

Community representatives highlighted the limited diversity in leadership roles in the cannabis industry, and their belief that there is less minority representation in this industry than in others. Stakeholders noted that people who are Black, Indigenous and from other racialized groups were subject to discrimination under prohibition and continue to be disadvantaged and under-represented under legalization.

The following paragraphs make a number of recommendations aimed at improving social equity. The objective is to make progress in undoing decades of discrimination. This will require sustained commitment over many years. Therefore, it will be important that there be ongoing, long-term attention to social equity issues. We believe that the future independent reviews that we call for in Chapter 12 should explicitly provide for an assessment of the progress made in advancing social equity, both with respect to participation in the cannabis industry and in relation to addressing disparities in interactions with the criminal justice system related to cannabis.

Supporting a diverse legal cannabis industry

We support the Government of Canada's goal of having a diverse legal industry, specifically, one that creates space for women, racialized communities, 2SLGBTQIA+, First Nations, Inuit, Métis and those disadvantaged by the historical harms of cannabis prohibition. We believe that at the outset of legalization there was a missed opportunity to address the harms of prohibition. However, that should not prevent action now. The federal government has a role to play in encouraging the participation of marginalized and racialized groups in the industry.

The current market conditions, as discussed, are challenging for most involved in the industry. Equity-deserving applicants seeking to enter the cannabis industry need to be provided with appropriate information and support. In developing programs and measures to increase the participation of these groups in the cannabis sector, Health Canada and its partners should take a comprehensive approach that looks beyond the first step of issuing a licence.

Health Canada should develop a specialized program for applicants from under-represented communities that provides pre- and post-licensing supports. This should include information about opportunities other than cultivation and processing licences, such as licences for industrial hemp and analytical testing. Footnote 38 Acknowledging the submission by the Competition Bureau entitled Planting the seeds for competition: Competition Bureau submission to Health Canada and the Expert Panel to support the Cannabis Act legislative review , which dealt with this issue, we believe that Health Canada should consider whether the requirement that applicants for licences have a pre-built site could be eliminated for equity-deserving and small business applicants. Footnote 39

We heard about difficulties that equity-deserving groups experience when attempting to secure loans, given their lack of existing networks and relationships with banks, lenders and investors. Health Canada could do more to make these applicants aware of business supports (for example, grants or loans) that may be available to them from other government departments and agencies (for example, the Black Entrepreneurship Loan Fund). Footnote 40 Similarly, we heard about the challenges micro-class applicants face, such as limited access to capital, regulatory burdens and difficulties navigating the licensing process.

During the licensing phase, Health Canada should consider reducing the costs it imposes for equity-deserving and micro-class applicants, including by reducing or eliminating regulatory fees related to applying for a licence.

After licensing, Health Canada should take a broad view of the supports that can be offered, including raising awareness about resources or educational opportunities offered by other departments or organizations that may help licence holders establish and run their businesses. For Health Canada this could include reviewing the annual regulatory fees charged to licence holders and providing more dedicated training and support to assist companies to comply with the requirements set out in the Act and its regulations.

Social equity and the criminal justice system

Many community representatives voiced their concern that disadvantaged and marginalized groups, especially racialized groups, continue to be disproportionately impacted by over-policing and interactions with the criminal justice system because of disparities in cannabis enforcement. There are gaps in knowledge about the impact of cannabis on specific groups, and the extent of ongoing racial discrimination in law enforcement, particularly with youth. It is well understood that charges or convictions related to cannabis offences cause enduring adverse social outcomes, such as stigmatization, negative impacts on family structures, job losses, difficulties in securing employment and restrictions on travel and housing access.

As of August 1, 2019, a distinct application process was implemented for those seeking a record suspension for historical convictions for cannabis possession. Footnote 41 , Footnote 42 This process was meant to be fairer and to better ensure the reduction of stigma and barriers experienced by those with such convictions. With this new process there is no fee or waiting period before an application can be submitted for many individuals. While a small proportion of people have made use of this distinct application process, access to this stream is expected to improve, as Public Safety Canada has funded non-governmental organizations to help individuals apply, including assisting with compiling all necessary documentation. Footnote 43 This process is not automatic and applicants must submit an application along with required documentation, which can be a barrier; it is an improvement over the regular record suspension process. However, the revised program only applies to those solely with simple cannabis possession convictions. Individuals with convictions for other cannabis offences (for example, production) must apply through the regular process, with its attendant costs and waiting periods, which can be as long as 10 years.

An automatic record sequestration process will come into force in November 2024 that will address all simple possession offences for all controlled drugs and will apply even if there are other non-drug offences involved. Footnote 44 , Footnote 45 We are encouraged to hear about this development; however, this new process only addresses offences under the Controlled Drugs and Substances Act and not those under the Cannabis Act . It is our understanding that the new process will be reviewed in November 2026; we encourage analysis and scrutiny of the efficacy and outcomes of the new process as it relates to cannabis convictions.

Improving information about cannabis for equity-deserving groups

As discussed elsewhere in this report (such as in Chapter 6), Health Canada should ensure that it follows an evidence-based approach when disseminating information on cannabis use and the associated risks and harms to consumers, or the public at large. As equity-deserving communities have their own interests and needs, informational materials should be co-designed with the intended audiences. Informational and educational programs need to be fact-based, non-stigmatizing, culturally appropriate, regularly evaluated and adjusted accordingly.

Enhancing data collection

Our efforts to assess the social equity impacts of legalization were hindered by a lack of data. There is no systematic collection of data on the diversity of the cannabis industry. In some surveys and other information collected by government, key sociodemographic data (for example, ethnicity or race) has not been collected, or, in some instances where this information is collected, it is not adequately disaggregated in the analysis or reporting of findings (including population surveys, health data, and data collected on police-reported incidents and criminal charges related to cannabis). While some progress has been made in recent years toward disaggregating data, more progress is required, including making this data publicly accessible.

Improving the monitoring of environmental impacts

While the Act and its regulations do not have any explicit environmental objectives, the Ministers broadened the scope of our review to include environmental impact.

Although the environmental impact of cannabis was not raised often during engagement, some participants highlighted concerns about cannabis product packaging. They raised issues about single-use plastic packaging and the limited use of packaging composed of cannabis and industrial hemp plant by-products. We also heard about the high rates of energy required for indoor cultivation. Some stakeholders discussed innovative approaches to reducing the environmental footprint of cannabis cultivation, such as the use of organic and regenerative farming practices, using cannabis as a bio-accumulator to help remediate the soil, making use of solar energy and the secondary use of cannabis by-product waste.

It is difficult to comprehensively assess the environmental impact of the cannabis regime, given the lack of data available. However, cannabis cultivation, processing and distribution across the supply chain undoubtedly have environmental impacts, including energy and water consumption, greenhouse gas emissions, air pollution, cannabis-derived odours, packaging waste and disposal of vaping devices, among others.

One of the objectives of the Cannabis Act (the Act) is to provide adults who choose to use cannabis with access to a quality-controlled supply of strictly regulated, legally produced cannabis. The goal of legalization was not to increase the number of people using cannabis. Rather, it was intended to provide those who already used cannabis with a regulated supply, complemented by a range of measures (including promotion restrictions, plain packaging requirements, labelling requirements and dissemination of information) that sought to discourage youth, and those who do not use cannabis, from initiating use. Footnote 46

Access to legal cannabis has improved since the Act came into force in October 2018. While there were supply chain issues in late 2018 and early 2019, it now appears that most adult Canadians who wish to obtain cannabis are able to do so from legal sources.

The distribution and retail sale of cannabis is controlled by provinces and territories. It is apparent that physical retail stores are the dominant means by which consumers access legal cannabis; however, retail density varies across the country. Some stakeholders highlighted challenges faced in rural and remote communities, particularly in the North, where retail store access is limited to larger population centres. In addition, Inuit communities also face unique challenges in accessing legal product due to limited access to credit cards and the Internet to buy legal products online.

Another element of access is the ability for consumers to legally obtain different types of cannabis products. Since late 2019, licensed processors have been able to develop and sell a wide range of cannabis products, with a variety that is generally comparable to the illicit market. However, in balancing its public health and public safety objectives, the framework does not provide unfettered access to all possible forms of cannabis. For example, there are restrictions that prohibit the sale of cannabis products (and accessories) that would be considered appealing to children. In addition, the current regulations on edible cannabis products (for example, beverages, gummies, chocolate) set a limit of 10 milligrams of delta-9-tetrahydrocannabinol (THC) in a package to address concerns about over-consumption and accidental consumption. Other forms of cannabis are also subject to restrictions, such as the limits on the ingredients that can be used to make cannabis vaping products and cannabis topical products.

Perspectives on the THC limit for edible cannabis products

Throughout our engagement, we heard calls from industry, and some consumers, to increase the amount of THC permitted in edible cannabis products. This issue was raised frequently, and our own deliberations around this topic exemplified a broader debate about balancing the protection of public health with the desire to provide adults who use cannabis with legal access to the products they want.

The general view of industry stakeholders was that the objectives of the Act would be best served by raising the THC limit for edible cannabis. They believe that making more potent edible products available in the legal market would encourage further displacement of the illicit market, and as a result, a greater share of the edible cannabis would be in child-resistant packaging (which is a requirement for legal products). As well, they argue there would be a reduced presence of illicit edible products that mimic common candies and foods that are enticing to children, and consequently there would be fewer unintentional exposures to children. Industry representatives also stated that the potential risks to adult consumers would be reduced by shifting more consumer to the legal market because illicit products may be contaminated or contain extremely high amounts of THC (for example, products on the illicit market often claim to contain between 500 to 1,000 milligrams of THC).

Public health stakeholders, on the other hand, supported maintaining the current limit on the THC content of edible cannabis. The public health community argued that legal products are likely contributing to the observed increase in the frequency of unintentional cannabis poisonings among children (for example, they noted higher rates of pediatric exposures in jurisdictions with greater availability of legal edible products). Public health representatives were also concerned that a higher THC limit would increase the severity of these unintentional exposures to children, citing research that suggests the threshold for severe or prolonged adverse effects on young children is quite low (1.7 milligrams of THC per kilogram of bodyweight, or about 20 milligrams of THC for a toddler). Footnote 47

Representatives from the public health community also noted that under the current limit, the majority of edible cannabis products offered include multiple units in each package (for example, 2 units with 5 milligrams of THC each), and argued that these smaller portions send an important signal to adults about appropriate dosing. Some in the public health community stated that while they support measures to increase displacement of the illicit market, it is not justifiable to undermine public health controls to accelerate the transition to the legal market.

These are conflicting points of view from stakeholders, and there are also shortcomings in the available evidence. While there are studies demonstrating increases in the incidence of child poisonings (see Chapter 5 of our What We Heard Report , as well as a recent study by Varin et al.), there is limited information available on the origin of the cannabis products involved in these events, and whether homemade edibles, illicit edibles or legally produced edibles were involved.

There is also uncertainty about the level of demand in the market for legal edible cannabis products with more THC. Industry representatives pointed to the sale of ingestible cannabis extracts as evidence of demand, but tended to disregard the price differential between these products and conventional edible products and the role that a lower price-per-unit may play in driving demand for a lower-cost product. Footnote 48 Notably, unlike dried cannabis where legal prices are increasingly competitive with the illicit market, illicit edible cannabis products may be up to 90% cheaper than legal products. Price will remain an important consideration for some consumers who are purchasing larger quantities or seeking larger doses of THC. However, in many provinces and territories, there are legal edible products containing 10 milligrams of THC that are available for as little as $3.

Industry also noted U.S. state markets, where edible cannabis comprises a greater share of the legal cannabis market, as well as estimates of illicit spending on edible cannabis products in Canada that suggest millions of dollars in revenue may currently be captured by the illicit market. Industry representatives also shared anecdotes about customers seeking larger amounts of THC, and some submissions we received referred to consumer research that suggests some cannabis consumers are critical of the current limit.

Public health researchers pointed to recent survey findings that suggest that only 12% of respondents, and 18% of cannabis consumers, were opposed to the THC limit on edible cannabis. Footnote 49 As well, public health stakeholders highlighted research (described in Chapter 10 of our What We Heard Report ) that found more than two-thirds of people who consume edible cannabis products reported sourcing them legally (in 2021, 68% reported buying exclusively from the legal market, 15% reported buying exclusively from the illicit market and 17% reported mixed sourcing). Footnote 50 Based on this evidence, they suggested that for most edible cannabis consumers, the current limit is sufficient and is not an impediment to legal sourcing. However, it is also apparent that there is a minority of edible cannabis consumers who wish to purchase edible products with more THC in them.

We deliberated extensively on the issue of the THC limit for edible cannabis products. The critical gaps in the current evidence made our efforts to reach a consensus position very difficult. There was a shared view that protection of children from accidental consumption is the paramount concern. Edibles come in forms that are much more attractive to children than dried cannabis and other cannabis products, therefore, the risk of ingestion is greater. This is reflected in the more stringent approach Health Canada took to regulating edible cannabis when these products were permitted in 2019, as compared to the higher amounts of THC permitted in other products.

We also agreed that any increase in the THC content of edible cannabis products would need to be coupled with additional controls to reduce the risk of accidental consumption (or over-consumption by adult consumers). Any additional controls would likely add to manufacturing costs for licence holders. Ultimately, we felt that there are too many unknowns and too much uncertainty about the likely consequences of increasing the amount of THC in these products. Therefore, we are of the view that prudence is warranted here and accordingly, we recommend that the current limit be maintained, and that research be undertaken that will fill critical knowledge gaps related to this issue. We also note that consumers wishing to ingest higher doses of THC continue to have access to oral oils and capsules, as well as a range of other cannabis products that do not resemble foods and do not pose the same risk of accidental consumption for children.

We encourage Health Canada to incorporate emerging evidence into future decisions related to the regulation of edible cannabis (which may suggest that THC limits could be increased or that additional controls are needed). This research needs to help characterize the likely impacts of a potential change at the individual and population levels, and on adult consumers, as well as those at risk of being unintentionally exposed, especially children.

Maintaining home cultivation rules

While home cultivation was a controversial topic at the time of legalization, it was not raised as a priority during our engagement. Most stakeholders who spoke to the issue of home cultivation supported the current approach (that is, the ability of adults to grow up to 4 plants in their residence). Some called for additional information to be made available on the health and safety risks associated with growing cannabis in or around a person's home (for example, detrimental effects on indoor air quality, electrical hazards, increased risk of fires).

There was no evidence that suggested reforms are needed to the federal rules on home cultivation. We do encourage continued efforts to raise awareness and provide information about potential risks, including safe storage of cannabis products in the home.

The federal framework for cannabis includes various measures aimed at protecting public safety and discouraging activities conducted outside the legal regime. Footnote 51 Central to the approach to displace the illicit cannabis market is providing adult consumers with the ability to purchase cannabis from legal, regulated sources, while setting out offences and sanctions to deter criminal activity and supporting law enforcement action against those who engage in illicit activities. Footnote 52

We note considerable progress has been made in achieving some of the important objectives of the legislation. It is clear that consumers who wish to access legal, regulated products can do so, and we are encouraged by evidence regarding the displacement of the illicit market.

As described in our What We Heard Report , there was a 95% reduction in the number of charges for cannabis possession between 2017 and 2022. We are encouraged that the provision of legal access to cannabis has reduced the negative impacts of prohibition which resulted from interactions with the criminal justice system. Footnote 53

We are concerned, however, with the criminal activity that persists. Of particular concern are the activities of organized crime and criminal networks (which often involve trafficking other substances and firearms, the use of firearms and the use of proceeds from cannabis to fund other serious criminal activities), the diversion of cannabis by some of those who are registered with Health Canada to produce cannabis for medical purposes as a source of illicit supply, the proliferation of unauthorized retail stores on First Nations reserves (that is, stores operating without community approval, or a provincial or territorial authorization) and the relative ease with which unauthorized online sellers operate.

We are also struck by the limited enforcement action against these criminal activities. We were provided with some examples of large-scale investigations leading to charges and convictions, especially for the import and export of cannabis. But overall, enforcement of the regime does not appear to be a priority. We appreciate that law enforcement does not have unlimited resources to address criminal activity and must prioritize its efforts; however, the integrity of the cannabis regime depends on deterring criminal activity. The absence of consequences, or any fear of consequences, will lead criminal actors to continue their activities, resulting in harm to individuals and communities. We also heard that the lack of law enforcement action leads some consumers to believe that illicit cannabis does not pose health or safety risks, or that the illicit cannabis is in fact legal. In this chapter, we offer recommendations to improve consumers' ability to distinguish between legal and illicit cannabis, as well as a series of observations that relate to the leading cannabis-related enforcement issues.

Addressing the illicit market

The evidence available to us indicates that there has been substantial displacement of the illicit market. While there are different approaches to assessing the extent of displacement, and some debate over individual estimates, it is clear that meaningful progress has been made over the first 5 years of legalization at the national level. For example, the latest estimate from Statistics Canada suggests that in the third quarter of 2023, 73% of household expenditures on non-medical cannabis was from legal sources, while the latest findings from the Canadian Cannabis Survey suggest 79% of cannabis consumers reported always or mostly obtaining cannabis from legal sources. Footnote 54 , Footnote 55

However, these reports and surveys about displacement rely on self-reported data, and some participants in our review cautioned that they do not tell the full story, which may lead to an underestimation of the size of the illicit market. Some survey respondents may not be truthful about the source of their purchases, for example, or may believe that they have purchased cannabis legally, given the efforts some illicit sellers take to make their products and presence look legitimate.

Some stakeholders have questioned recently published findings from the 2023 Canadian Cannabis Survey that indicated only 3% of cannabis consumers reported usually obtaining cannabis from illicit sources (that is, an illegal store, illegal website or dealer), although notably an additional 15% of consumers reported usually obtaining cannabis from social sources (that is, acquaintances, friends or family members). In response to a separate question, 15% of consumers indicated that they rarely or never buy from legal sources. Footnote 55

Continued monitoring of the legal share of the total market, along with regular public reporting on the extent to which the illicit market has been displaced, will be important to help guide policymaking and priority-setting by all levels of government. We caution against relying on a single measure of displacement and advise examining multiple indicators together when trying to gauge progress. This effort should include disaggregating by type of cannabis product (for example, examining dried cannabis and cannabis vaping products separately), assessing differences in the extent of legal sourcing in different regions and considering different types of consumers. National estimates, and those that rely on one type of indicator, lack nuance and obscure important trends. For example, we heard from some First Nations communities who have seen organized crime groups move into their territories and increase the illicit trade of cannabis locally. Such activities are not detectable in national, provincial or territorial spending figures.

We also caution against setting a displacement target. We believe that a target would be arbitrary and may lead to unintended consequences (for example, after the target is reached, criminal enforcement activities may be deprioritized and resources redirected, which could be exploited by illicit operators and organized crime). Rather, the Government of Canada should strive to displace the illicit market to the extent possible and implement measures that promote a continued transition toward a legal, regulated cannabis market.

The Government of Canada should support continued displacement of the illicit market, relying on strategies that prioritize the protection of public health and public safety. To support further displacement, the government should employ measures that both "push" and "pull" consumers to the legal market and consider initiatives that address both supply and demand. Examples include permitting product types and formats that are reasonably competitive with those on the illicit market (while maintaining safeguards to mitigate risks to public health and public safety), disseminating information for consumers in an effort to discourage demand for illicit cannabis products and taking enforcement actions against illicit producers and sellers to reduce the supply of illicit cannabis.

Organized crime and criminal networks

Law enforcement highlighted the ongoing involvement of organized crime in the production and supply of illicit cannabis. They noted investigations have established linkages between organized crime suppliers and online sellers. Illicit supply may end up being distributed and sold in different places (for example, the export market). We heard concerns about the illicit market supplying products to unauthorized stores on First Nations reserves (that is, stores operating without approval from the community, or a provincial or territorial authorization) and to unauthorized retail stores that are re-emerging in major cities and to illicit online sellers.

Diversion of cannabis from personal and designated production for medical purpose sites

As discussed in Chapter 11, some law enforcement officials pointed to the abuse of the personal and designated production of cannabis for medical purposes program as a contributor to illicit supply. Some criminal actors seek registrations for large plant counts without having any medical need and solely as a means to provide cover for their illicit production activities. We also heard concerns about the resulting threat to public safety for residents near areas where this large-scale, organized criminal activity takes place.

Health Canada must do more to address the practices that lead to registrations that produce large amounts of cannabis for the illicit market. This needs to involve action on a number of fronts, including restricting the number of registrations on a single site, seeking additional justifications from authorizing health care professionals about the amounts of cannabis they are recommending and refusing or revoking applications where there are risks to public health or public safety (including the risk of cannabis being diverted). See Chapter 11 for a broader discussion and recommendations related to the personal and designated production program.

Unauthorized retail stores on First Nations reserves

As discussed in Chapter 7, illicit cannabis operations on First Nations reserves that are not authorized by the community pose many health and safety problems for residents. These stores sell unregulated products that do not comply with product, packaging or labelling rules, including products designed to be attractive to youth. Community leaders believe that many of these stores are supported by criminal elements from outside of their communities. We heard that community leadership and police services often do not have the capacity to shut down these stores, and there needs to be more assistance from, and coordination with, other police services that are responsible, such as the Royal Canadian Mounted Police or provincial police services.

Illicit online sales

We heard about illicit sales of cannabis on both the dark web and the surface or traditional web, including how illicit sellers use websites and social media to facilitate their sales. These sites and platforms offer anonymity and ease of access (including for youth) and offer products that are not available in the legal market (for example, edible products with higher amounts of delta-9-tetrahydrocannabinol [THC], or products that are designed to be attractive to youth).

Sites on the surface web often appear to be legal, offering a variety of payment methods (including Interac and credit card), which may cause consumers to believe they are legitimate. Law enforcement indicated that investigating illicit online sellers is a significant challenge due to the complexity and time involved in locating, identifying and tracking the host of the websites. Illicit operators often use virtual private networks or route their address through multiple jurisdictions to camouflage their locations. Further, even if an illicit site has been identified and shut down, it is relatively simple for the criminal actors to launch another site.

Addressing illicit market actors

Enforcement action to address the criminal activity of illicit market actors is essential to achieving the Cannabis Act 's (the Act) public safety objectives.

Law enforcement has a vital role to play in enforcing the criminal offences in the Act. Notwithstanding the other priorities they must manage, we encourage law enforcement to increase their focus on cannabis-related criminal activity, especially when organized crime is involved. Since the burden of enforcement should not fall entirely on the police, we encourage Health Canada, Public Safety Canada and regulators in the provinces and territories to work with law enforcement to develop a comprehensive strategy to address illicit activity.

However, we also recognize there is an opportunity for other (non-criminal enforcement) activities to address both demand and supply, to deter criminal activity and support further displacement to the legal market.

On the demand side, we emphasize the need to collect better information about the motivation of consumers for buying from illicit sources, as this will shape the direction of policy in the future. In the interim, continued dissemination of practical information for occasional consumers about how to recognize legally produced cannabis and authorized retailers may better equip them to recognize and choose legal products (for example, looking for excise stamps, child-resistant packaging or the standardized cannabis symbol). We understand that both Health Canada and some provincial and territorial distributors have done this. For legacy consumers, price declines in the legal market may also influence their choice of markets, especially for product formats other than dried cannabis where price differences remain. However, as noted in Chapter 8, we would not want to see lower prices encourage consumption.

While Health Canada's primary role is to licence and oversee the legal industry, we understand it works closely with law enforcement and may refer suspected illicit activity for investigation (for example, complaints received about illicit sellers or information about unauthorized production for medical purposes). We encourage the department to continue this and to work with law enforcement and provincial and territorial partners to issue public advisories or other forms of communication about illicit products and the harm they pose. This could involve regularly testing seized products and releasing information about the presence of contaminants and THC quantities or concentrations.

On the supply side, we see potential for the use and enforcement of municipal zoning bylaws, or business licensing rules, to discourage the proliferation of illicit physical stores. We note provisions in British Columbia legislation, for example, which enable charges to be laid against the landlords of illicit physical stores. In our view, landlords should not profit from leasing to businesses selling illicit cannabis, nor should illicit sellers be able to use these stores and the signage associated with them to encourage consumption and entice youth.

We recognize that police investigations into illicit online sellers are time consuming and require specialized competencies and tools which may not always be available, especially for smaller police services. We encourage governments to consider the approach of British Columbia's Community Safety Unit, where civilian investigators coordinate enforcement actions with law enforcement partners locally and across Canada. We understand that this Unit has access to tools to investigate potential illicit operators (sellers and producers). It is authorized to demand and inspect records, seize and destroy illicit cannabis products and other items, and impose monetary penalties against illicit operators.

British Columbia has had some success in disrupting the activities of illicit online sellers. Over 1,500 sites were investigated as of January 2024, with almost 1,000 disrupted. Nonetheless, we heard that there are limitations due to the lack of legal authority compelling Internet service providers to remove illicit content. Footnote 56 Similarly, there is no requirement for financial institutions to track and prevent illicit actors from using their services. We understand some provinces are considering measures in this area, by amending laws to provide authority for judicial orders, to compel the removal of illegal sites from online platforms and to compel financial service operators to provide financial information that helps identify illegal online cannabis operators and to stop providing services to those operators. We feel it would be in the best interests of public health and public safety for various levels of government to consider new tools aimed at shrinking the amount of harmful criminal activity online.

In this regard, we note that the Government of Canada recently introduced Bill C-63, the Online Harms Act . The purpose of this proposed legislation is to, among other things, promote online safety and to reduce harms caused as a result of harmful content (such as hate speech, or content that insights violence). It would create a Digital Safety Commission to administer and enforce the Act, including requirements for the operators of social media services to implement measures to mitigate the risk that users will be exposed to harmful content on their services, and to integrate features to protect children. We encourage parliamentarians to consider how the proposed legislation could be used to better protect children and youth from the harms associated with exposure to substances, including cannabis.

Cannabis-impaired driving

We heard that cannabis-impaired driving continues to be a significant concern that requires ongoing enforcement efforts. Law enforcement officials, especially those in rural and remote communities, told us that they face challenges accessing the tools, training and personnel required to detect cannabis use and confirm impairment in drivers. Cannabis-impaired driving is an area that deserves priority attention because the actions of impaired drivers can result in serious injury or loss of life to the drivers and others.

We appreciate that governments at all levels, as well as civil society actors, have made efforts to emphasize the importance of not driving while impaired by cannabis. Given the significant shifts in social norms with respect to driving while impaired by alcohol, there are likely lessons that can be applied to prevent cannabis use and driving.

Access to cannabis for medical purposes was one of the more complex issues we were asked to review. We recognize that there are longstanding court-affirmed rights to reasonable access to cannabis for medical purposes. However, legalization changed the context for this form of access; there is no longer an absolute prohibition on cannabis, as was the case when the medical regime was developed in the early 2000s. This initial regime provided a way for people to legally possess and produce cannabis, and later to legally purchase cannabis, for their own medical use without the fear of being investigated, charged and possibly jailed.

The medical regime now exists within a broader legal framework where all adult Canadians can legally purchase and possess cannabis, and in most provinces and territories, also legally grow up to 4 plants. Footnote 57 Patients who wish to use the medical access program, including young persons, must have a medical document from a health care professional, which includes an authorized daily amount based on medical need (set out in grams of dried cannabis per day); however, there is no limit to how much cannabis a health care professional can authorize. Footnote 58 In the medical access program under the Cannabis Regulations , individuals have the option to register with a seller licensed by Health Canada to purchase cannabis products that are then shipped to them or to register with Health Canada to grow cannabis or designate someone to grow it on their behalf (this is referred to as personal or designated production).

In 2016, the Task Force acknowledged that a separate system would be necessary to preserve medical access for patients at a time of unprecedented change. It recognized that the medical access system would need to be reviewed in light of legalization and recommended that the Government of Canada evaluate the framework within 5 years of legalization.

The Task Force also acknowledged that while a regulatory pathway existed for the approval of cannabis medicines (that is, pharmaceutical drugs with a Drug Identification Number), uptake was limited. It noted that the Government of Canada needed to do more work to promote and support pre-clinical and clinical research to facilitate the approval of cannabis-based medicines held to pharmaceutical standards, recognizing that research and drug development processes take many years. It also noted the federal government's efforts to explore a different pathway for "wellness" products (for example, products containing cannabidiol [CBD] or non-psychoactive cannabinoids), such as those modelled on natural health products. Notwithstanding the Task Force's recommendations, limited progress has been made to improve medical access through either the pharmaceutical drug (drugs with a Drug Identification Number) or health product streams.

Throughout our review, we heard a range of perspectives on the future direction of access to cannabis for medical purposes, as well as an underlying sentiment of frustration with the current state of access. The legalization of cannabis has had a profound impact on how Canadians access cannabis. However, patients, health care professionals, medical regulatory bodies, municipalities and law enforcement have all voiced concerns about how legalization has impacted access to cannabis for medical purposes. Further, legalization has not resulted in the desired improvement to the clinical knowledge about cannabis for medical purposes, and there continues to be stigma around its use.

We heard from many patients and their caregivers, as well as patient advocacy groups, harm reduction groups, cannabis clinics and compassion clubs, and recognize the desire of many people to have access to cannabis for medical purposes to manage their symptoms and conditions. Given the lack of progress towards the approval of cannabis as pharmaceutical drugs and of health products containing cannabis, we see a need to maintain a distinct medical access program, with improvements, to better support patient care and to address abuse of the personal and designated production program. Currently, the medical access program is the only system that offers patients using cannabis for medical purposes oversight from a health care professional.

Despite limited clinical evidence regarding the therapeutic benefits of cannabis, individuals suffering from a variety of medical conditions report deriving therapeutic benefits from cannabis. Many Canadians use the medical access program, and many more report using cannabis for medical purposes outside the medical access program.

As of September 2023, there were approximately 203,000 individuals registered to obtain cannabis for medical purposes. This includes the 188,000 Canadians registered with licensed sellers and the 15,000 Canadians registered with Health Canada for personal and designated production. Registrations for personal and designated production are almost all for personal production, with only 300 registrations for designated production. In contrast, at the time of legalization, some 371,000 Canadians were registered to access cannabis for medical purposes: 345,000 with licensed sellers and 26,000 with Health Canada for personal and designated production (of which 1,300 were for designated production). Footnote 59

Those involved with the medical program shared numerous suggestions for improvements, including supporting greater recognition of cannabis as a harm reduction tool, greater access to knowledgeable health care professionals, more reliable and affordable product options, and improved eligibility for insurance coverage.

We appreciate that there are still significant gaps in the evidence in this area and recognize that cannabis is not a suitable treatment for many individuals, nor is it risk-free. At the same time, there is a need to continue to support the 203,000 currently registered patients who rely on the medical access system, as well as enhancing the program for future registrants. This chapter details ways to better support patients within the parameters of the program and the evidence that exists today. As our proposed changes are implemented, we hope that there would be an assessment of their impact, as well as any additional evidence developed. This would help guide future decisions related to medical access.

Enabling pharmacy access

In our view, an important change to improve access to cannabis for medical purposes would be to allow patients to obtain cannabis in-person from pharmacies. Some jurisdictions that permit medical access (such as Australia, France, Germany, Israel, Italy and the United Kingdom) use pharmacies as the means to distribute cannabis through prescriptions. While the individual regimes vary (some make very limited product forms available and some offer insurance coverage), the pharmacy distribution model recognizes there are benefits to cannabis being provided in a manner similar to pharmaceutical medications.

Pharmacies are equipped to manage many types of products. We believe pharmacy systems and infrastructure can be adapted to handle cannabis, given they already manage controlled substances, such as narcotics. Enabling this form of access would address patient concerns about the delays with mail delivery and product shortages they encounter today. It would also provide patients with an opportunity to consult with pharmacists and be counselled on effects on mental health (such as psychosis) and issues of medication management (for example, getting advice about contraindications and interactions with other substances).

We understand that the Cannabis Regulations already enable distribution of cannabis by hospital pharmacists so that patients can continue to have access to cannabis while seeking treatment at a hospital. While this is not a major element of the current regime, we believe the current regulations and recent experience could help inform a system that enables wider pharmacy access.

While we believe there would be overall benefit to enabling pharmacy access to cannabis for medical purposes, we understand that some pharmacists and pharmacy regulatory authorities are concerned about the potential for unintended consequences. They have shared concerns that some people may believe cannabis is a prescription medication that meets rigorous safety, quality and efficacy standards because of the involvement of pharmacists in providing it. This issue could be addressed in part by providing better information for health care professionals and for patients.

Establishing a pharmacy access channel cannot happen overnight. It would require regulatory changes from Health Canada, consultation with interested provinces and territories, and regulatory authorities for pharmacists, as well as potential changes at the provincial and territorial level related to the scope of practice of pharmacists. Enhanced cannabis-specific training and education supports would be required to prepare pharmacists for this new role. We note there is already some cannabis-related training available for pharmacists, notably those in Ontario.

Further, we acknowledge that pharmacy access would not address issues of affordability (including the sales and excise taxes that are applied to cannabis products sold for medical purposes). Finally, it is unlikely that every pharmacy would choose to participate in providing cannabis for medical purposes, or that individual pharmacies would stock hundreds or thousands of different cannabis products.

Notwithstanding these issues, we believe Health Canada should take the first steps to create this access channel. This should include establishing requirements for pharmacies to manage the safe storage and handling of the products.

Consultation with relevant parties would be required to ensure the effective development and implementation of access to cannabis for medical purposes in pharmacies. Health Canada should work closely with interested provinces and territories to establish pharmacy access, and to evaluate these efforts for the benefit of other jurisdictions that may be considering similar models.

We also believe that the current mail order delivery system should be maintained for the benefit of patients who prefer that form of access. The mail order access system would also continue to play an important role for patients in areas without pharmacies, or in provinces and territories where pharmacy involvement might be more limited. We understand that the current system also authorizes health care professionals, such as nurse practitioners, to receive cannabis from licensed sellers and to distribute it to patients; these provisions could be expanded to enable the shipment of cannabis from pharmacies to health care professionals, thereby supporting patients in rural or remote regions (for example, those receiving care at nursing stations in the North).

Research on the use of cannabis for medical purposes

Despite recommendations made more than 7 years ago by the Task Force to promote and support pre-clinical and clinical research into the use of cannabis for medical purposes, little progress has been made.

We believe more needs to be done to study the therapeutic uses of cannabis to better understand both the potential benefits and the potential risks. We feel that beliefs held by many Canadians on the use of cannabis for medical purposes, or as a substitute for the use of other substances, are not generalizable across health conditions, or specific cannabis products. Further, these beliefs are not based on reliable, high-quality evidence for specific health conditions. Additional research is needed to better guide the use of cannabis for medical purposes.

That said, we feel that cannabis products should follow the same regulatory pathways as other health products in order to obtain a Drug Identification Number and make health claims. Health Canada has established robust systems for evaluating the safety, quality and efficacy of a range of health products, and the evidentiary standards set in these systems should be maintained for cannabis. In our view, advancing research on the use of cannabis for medical purposes hinges on identifying and removing the barriers that currently impede good quality research, and not relaxing standards in the case of cannabis.

Addressing barriers to research

A key barrier that researchers identified to us was difficulty accessing cannabis products manufactured according to Good Manufacturing Practices, which refers to a system of processes, procedures and documentation that ensure a product (for example, a pharmaceutical drug) meets appropriate quality standards for its intended use. Canadians who use cannabis for medical purposes consume a wide array of product types, and the research materials used in clinical studies should reflect this variety. However, some Canadian cannabis licence holders manufacture cannabis products compliant with Good Manufacturing Practices predominantly for export markets (that is, to countries that require this standard for cannabis products, including Australia, Israel and Germany). It may be possible to increase Canadian researchers' access to quality cannabis that meets the requirements under the Good Manufacturing Practices to conduct clinical trials.

Obtaining access to cannabis that meets the requirements under Good Manufacturing Practices is a necessary step to conducting clinical trials with cannabis, but funding is another significant barrier. Given the widespread availability of cannabis and existing beliefs about the medical benefits of products already available, many pharmaceutical companies may not see sufficient return on investment in research and product development, although some companies and academic researchers continue to conduct clinical research with cannabis. Therefore, public investment may be required to make meaningful advances in research on the therapeutic uses of cannabis.

The Government of Canada has an opportunity to encourage researchers to undertake studies on the medical use of cannabis by making research priorities clear and providing targeted funding opportunities. Cannabis, in many different forms, is currently used to treat a range of symptoms and conditions, and prioritization of research needs is important. To that end, we encourage Health Canada to support a transparent process to identify the specific potential therapeutic applications of cannabis that would benefit most from additional study.

Facilitating better information, guidance and education for health care professionals

Throughout our review, we heard that the lack of clinical information, guidance and training for health care professionals on the use of cannabis for medical purposes has a negative impact on patient care. Health care professionals find the medical authorization process (that is, the document required by the regulations that forms the basis of a patient's registration for medical access) difficult to navigate. Many health care professionals are also uncomfortable with the lack of clinical evidence that is available for many uses of cannabis.

In addition, many patients report difficulty finding a health care professional with sufficient knowledge and interest in overseeing cannabis-based therapies. In the absence of knowledgeable health care professionals, some patients obtain their authorizations through cannabis clinics with whom they have little to no prior relationship or history.

We endeavored to consult broadly with the medical community throughout our review but were largely unsuccessful. While we did receive some written submissions, and some physicians attended our roundtables on cannabis for medical purposes, the limited engagement meant that our deliberations on this important issue did not have the benefit of the full perspective of all parts of the medical community.

It is our understanding that many medical professionals are reluctant to recommend that their patients use products that have not gone through a rigorous review process to evaluate their safety, quality and efficacy. However, the reality is that approximately 203,000 Canadians are registered in the medical access program, while many others are using cannabis they obtain from recreational stores or from the illicit market to treat a variety of medical conditions. Most of these people are receiving advice from friends and family members, sales personnel in retail stores ("budtenders") and the Internet. The paucity of health care professionals with knowledge of cannabis therefore leads to a situation where many of these medical consumers are putting themselves at risk.

There should be more education for health care professionals. Some health care professions, including nursing and pharmacy, have taken steps to educate their members. The Canadian Nurses Association, with funding from Health Canada's Substance Use and Addictions Program, developed a national cannabis framework called Non-Medical Cannabis: A Nursing Framework and a nursing e-learning course, Understanding Cannabis in Clinical Practice . The Ontario College of Pharmacists requires practicing pharmacists who provide patient care to complete mandatory cannabis education. We also understand that some medical schools include course modules and information on cannabis, including the Cannabis Education for Health Care Providers Toolkit from the University of British Columbia. However, much more needs to be done to improve the knowledge of health care professionals, especially physicians.

There is an opportunity to improve how knowledge about the use of cannabis for medical purposes is collected and shared. In 2018, Health Canada published Information for Health Care Professionals: Cannabis (marihuana, marijuana) and the cannabinoids which described the evidence available at that time about various conditions and diseases. We encourage Health Canada to update this document and take steps to keep the information up-to-date, such as creating a knowledge hub that can provide health care professionals, researchers and interested members of the public (including patients) with current, reliable information to guide decision-making.

There is also a need to develop and disseminate national clinical guidance documents to increase the knowledge and understanding of health care professionals related to cannabis for medical purposes. These documents should be informed by experts, available scientific research and build on information already available from other jurisdictions. For example, Israel's national cannabis authority has developed clinical guidance for cannabis for medical purposes that covers topics such as: approved clinical indications, products, quantity or concentration, dosing, and abuse and addiction. This material, which was developed with medical associations, gives health care professionals information on which to base their decisions as clinicians.

Advancing cannabis-based health products

In 2019, Health Canada created an independent Science Advisory Committee on Health Products Containing Cannabis to examine the evidence on the use of cannabinoids to treat short-term minor ailments without health care practitioner oversight. In February 2022, the committee published its Review of cannabidiol: Report of the Science Advisory Committee on Health Products Containing Cannabis .

We understand Health Canada is building on this work and exploring the potential for cannabidiol (CBD) to be used as a medicinal ingredient in certain non-prescription health products authorized under the Food and Drugs Act (for example, products suitable to be used for symptomatic relief of stress or promotion of sleep). Other cannabinoids, including delta-9-tetrahydrocannabinol (THC), are not being considered for non-prescription use at this time.

Increased availability of cannabis-based health products that have been reviewed and authorized under the existing framework for non-prescription or natural health products would mark an important advancement, because it would provide Canadians with access to legal products that have been reviewed for safety, quality and efficacy.

Health Canada should also establish a scientific advisory committee to review the science on THC and assess the current evidence (including risks and benefits) on the use of THC for medical purposes. This work should be accompanied by targeted research related to THC and its combination with other cannabinoids, in partnership with agencies such as the Canadian Institutes of Health Research. This would help to move beyond the current situation where cannabis for medical purposes is not subject to standard drug approval processes and is viewed by many in the health sector as being outside of evidence-based or conventional practice.

Amending the medical document

There are other issues within the medical access program that we believe should be addressed, with the medical document being a high priority. To support better understanding among patients, the medical document should include specific information from health care professionals related to product format and dose, similar to other substances.

The current requirement that the authorization is provided only in number of grams of dried cannabis per day that can be consumed by the patient is not adequate. It does not provide any guidance on what product format to use (for example, cannabis oil capsule compared to an oral spray), the cannabinoid profile of the product (for example, THC dominant, CBD dominant) or how many times a day the patient should use cannabis. It leaves patients to interpret too much on their own and may encourage patients to use combustible products rather than non-combustible products (such as edibles or topicals). We recognize that permitting greater specificity in the medical document may present challenges for some health care professionals, and not all may opt to be that specific. However, for those that do choose to provide more specificity, knowledge gaps could be addressed by clinical guidance built from existing information on the use of cannabis for medical purposes.

Addressing abuse of the personal and designated production program

The personal and designated production program provides individuals the option to register with Health Canada to grow cannabis or designate someone to grow it on their behalf. The authorization amount on a person's medical document determines how many plants they can grow. In accordance with a formula in the Cannabis Regulations , this generally translates to 5 plants per gram for indoor growing and 2 plants per gram for outdoor growing.

There is currently no limit to how many plants a registered person can grow, as long as it aligns with the authorization amount set out on their medical document. Additionally, the regulations permit up to 4 individuals to grow cannabis for medical purposes at a single site, which has resulted in locations with thousands of plants.

Some patients who rely on personal or designated production to access cannabis for medical purposes consider it to be a more affordable option than purchasing cannabis from licensed sellers. However, for those who choose to grow cannabis for medical purposes, there are cost implications (such as purchasing starting materials, electricity). Others told us that they rely on personal or designated production because it provides them with reliable access to particular strains of cannabis and avoids situations where licensed sellers stop producing the products they want or stop selling entirely.

We believe that patients should continue to have this form of access available to them; however, it is also clear that additional measures are necessary to prevent abuse of the program and reduce its contribution to illicit supply. Law enforcement, municipalities and patients have all raised concerns about abuse of the personal and designated production program, particularly when individuals have authorizations for large plant counts. They indicated that this abuse is a significant contributor to the supply of illicit cannabis in Canada. We note that law enforcement shared this same concern with the Task Force in 2016. We also heard from municipalities about risks to community safety from such criminal activity taking place in residential areas.

The extent of the abuse of the program is unclear as the evidence is not comprehensive. There have been some large-scale police efforts against these activities, with some leading to charges and convictions. However, as noted in Chapter 11 of our What We Heard Report , the number of charges and convictions related to illicit distribution and sale activities has declined every year since legalization.

While the total number of active registrations for personal and designated production has declined in recent years, there are still thousands of locations where cannabis is being grown under this program. Further, the ability for multiple individuals to locate their production at a single site leads to situations that are comparable to commercial cultivation operations, yet without any of the safeguards applied to commercial licence holders (for example, security requirements and odour control measures). We understand that these types of sites pose particular challenges for law enforcement because of the size of the activities and difficulties in assessing whether individual registrants are complying with the law. We believe that Health Canada should restrict the number of registrations at a single location from 4 to 1, building on information from law enforcement partners about the risks posed by co-location and the extent of illicit activity occurring at these sites.

In addition to risks associated with co-location, the ability to obtain authorizations to grow large quantities of cannabis creates an avenue for patients to use quantities of cannabis that are well over clinical guidance and may be harmful to their health. These health harms may include short-term adverse effects such as cannabis poisoning, or long-term effects such as addiction or impacts on mental health. Additionally, cannabis grown under personal or designated production registrations is not subject to quality controls or mandatory testing. Registered persons could consider making use of licensed analytical third-party testing facilities to ensure the quality and safety of their cannabis.

As of September 2023, the average amount of cannabis authorized for daily use by those buying from licensed medical sellers was 2.3 grams per day. This amount has remained relatively constant since October 2018. In comparison, the average daily amount authorized for those registered for personal or designated production was 33 grams per day as of September 2023, a 28% decrease from the peak of 45 grams per day in September 2021. We note that the average daily amount in British Columbia is well above this, at 59 grams per day. Footnote 59

Health Canada has made progress in addressing high authorization applications (that is, where a health care professional has authorized an amount that would lead to a large number of plants being grown) by seeking additional justification from the health care professional for the amount in question. In the absence of additional evidence or information to support the amount, the department can refuse or revoke the application on the grounds it poses a risk to public health or public safety. However, while Health Canada has held these authorities since 2018 when the Cannabis Regulations came into force, it only began to seek additional justifications in 2021.

Health Canada officials indicated that as of November 2023, there have been 2,942 refusals and revocations, compared to 431 in September 2021, with the majority having been refused or revoked on the basis of risks to public health or public safety. Footnote 60

Health Canada also provides regular reports to provincial and territorial regulatory authorities on health care professionals authorizing over 25 grams per day. Notably, as of September 2023, there were 226 health care professionals associated with authorizations between 25 and 100 grams per day, concentrated in Ontario (104) and British Columbia (72). Footnote 59 While there may be a legitimate medical need for larger amounts, such exceptional cases should be investigated by the relevant regulatory authorities for physicians and nurse practitioners in these provinces. It is our understanding that some regulatory authorities have followed up on the reports and started investigations into the practices of the physicians and nurse practitioners.

The added scrutiny appears to have reduced both the number of individuals registered for personal and designated production of cannabis, and the average amount authorized by health care professionals. Health Canada should continue this work, and extend this additional scrutiny to more registration applications to deter and reduce abuse.

Health Canada should continue to conduct inspections of sites with registrations for personal or designated production. Inspections are an important oversight tool for the department. We understand that findings from inspections can support revocations of registrations and referral to law enforcement (for example, situations where the registered person is growing more plants than they are authorized for).

In our review, law enforcement representatives suggested the elimination of the personal and designated production program. However, we also heard from patients and health care professionals about those who rely on it and carry out their production activities without risk to public health and public safety. If Health Canada contemplates significant changes or elimination of the program in the future, it should carefully consider the potential impacts on patients and have measures in place to address concerns about affordability. It would also need to consider the interests of patients who reside in provinces where the cultivation of cannabis outside the medical access program is prohibited (such as in Quebec and Manitoba).

Supporting innovative approaches within the current system

The current medical access system does offer some flexibility for innovation, enabling support for harm reduction and vulnerable or marginalized populations, when under health care professional supervision and using regulated products. We hope that in the near future, models such as the High Hopes Foundation will be the subject of more evaluation and research.

The High Hopes Foundation is a non-profit initiative focused on harm reduction programming for substance users in Vancouver's Downtown East Side. In 2022, the Foundation was issued a medical sales licence from Health Canada. High Hopes offers compassionate cannabis pricing and aims to minimize costs to patients. The Foundation is the pickup site for individuals who are authorized to use cannabis for medical purposes but who do not have a fixed address or who experience homelessness. We had the opportunity to visit High Hopes in March 2023 to see their model in action.

Ensuring affordability of cannabis products for medical purposes

The cost of cannabis for medical purposes continues to be a major concern for patients. We heard that in some cases, products in the medical market are more expensive than in the non-medical market. This may encourage patients to buy cannabis from a retail store or an illicit source rather than through the medical access program. In doing so, they may not seek out medical oversight and put themselves at risk of receiving products that may cause harm.

Patients want cannabis for medical purposes to be treated like prescription drugs, which are generally covered by insurance or benefit programs and are exempt from excise and sales taxes. Finance Canada should examine the excise tax as it relates to cannabis for medical purposes, especially if pharmacy access is permitted as recommended.

Most patients who use cannabis for medical purposes do not have insurance coverage. Approximately 3% of respondents who completed the medical portion of the 2023 Canadian Cannabis Survey indicated they had full insurance coverage and 4% said they were partially covered. Footnote 61 We heard from several patients that the lack of coverage created a significant cost burden for them. As discussed earlier in this chapter, cannabis for medical purposes does not meet the same standards as prescription medications that are routinely covered under drug insurance plans and is generally not covered by private insurers.

Some participants in our consultations noted the insurance coverage for cannabis for medical purposes for Canadian veterans provided by Veterans Affairs Canada. We also heard about the lack of coverage for First Nations and Inuit under the Non-Insured Health Benefits program, which is administered by Indigenous Services Canada.

The impact of Veterans Affairs Canada's program on the health and well-being of veterans is unclear, and we also heard about the rapid increase in the costs of this program. In 2021-2022, benefits of over $153 million were paid for cannabis, which is nearly double the amount paid for all prescription drugs combined ($79 million). The department has forecast that costs for cannabis for medical purposes will rise to over $380 million by 2026-2027, compared to prescription drugs costs which are forecasted to rise to $124.5 million. Footnote 62 We understand that Veterans Affairs Canada is looking into cost-effective ways to manage the growth in the program.

The Standing Senate Committee on Indigenous Peoples (the Standing Senate Committee) published a report on the implementation of the Cannabis Act and its effects on Indigenous Peoples, and recommended that Indigenous Services Canada cover cannabis for medical purposes under the Non-Insured Health Benefits program. The Standing Senate Committee gave several examples of potential harm reduction initiatives involving cannabis and how lack of access to cannabis for medical purposes may hamper these initiatives. The Standing Senate Committee also reported that individuals may not have the resources to purchase cannabis for medical purposes, which can detrimentally impact their substance use treatment.

Some members of the Panel were supportive of the Standing Senate Committee's recommendation related to benefit coverage for cannabis for medical purposes through the Non-Insured Health Benefits program. These Panel members recognize that many Indigenous Peoples assert that health benefits are an inherent Aboriginal and Treaty right. Without deciding the scope or validity of this assertion, they recognize the Government of Canada's fiduciary duties to Indigenous Peoples generally, and that the program is a means of better ensuring registered First Nations and recognized Inuit achieve an overall health status that is comparable to other Canadians. Understanding the impacts of historical colonialist policies upon Indigenous Peoples, the resultant losses to traditions, cultures, identities and languages, and the ensuing intergenerational traumas, they recognize that many Indigenous People experience disproportionate levels of negative health outcomes. Efforts to redress these health inequities should employ all available and indicated treatments, including cannabis as deemed appropriate by a health care professional. It is the position of these Panel members that it would be an unjustifiable and inequitable error for the Non-Insured Health Benefits program not to provide coverage. These inequities are magnified when compared with the Government of Canada's current coverage for veterans. Acknowledging the concerns presented in the Veterans Affairs Canada coverage model, these members believe coverage as part of the Non-Insured Health Benefits program could be provided on an exceptional basis, rather than as an open benefit.

Other members of the Panel felt it is premature to recommend benefit coverage for cannabis for medical purposes under this program, or any other Government of Canada insurance program. First, as officials noted to the Standing Senate Committee in 2018, there are gaps in the evidence about the use of cannabis for therapeutic reasons. Second, effort needs to be made to understand why the Veterans Affairs Canada insurance program grew so quickly and what this might mean for other benefit programs that might consider providing coverage of the costs of cannabis for medical purposes. Third, further consideration would need to be given to the projected costs and the impacts on the overall budget for the Non-insured Health Benefits program. Fourth, the federal government provides insurance coverage to other groups, including members of the Canadian Armed Forces and the Royal Canadian Mounted Police; Panel members questioned if it would be feasible to extend coverage under the Non-Insured Health Benefits program without accounting for and considering these other federal programs.

All Panel members agree that there are both equity and state of evidence considerations related to the issue of insurance coverage for cannabis for medical purposes. However, we could not find consensus on the issue of whether the Non-Insured Health Benefits program should provide coverage for cannabis for medical purposes.

All Panel members agree that more information would be helpful in finding a way forward. In this regard, the Panel supports further analysis of the recommendation from the Standing Senate Committee, on a priority basis, with Indigenous representatives being meaningfully involved in this work. The Panel also welcomes Veterans Affairs Canada's effort to review ways to manage the growth in its program. Both of these initiatives would also help inform the larger question of whether and under what conditions there should be insurance coverage for cannabis for medical purposes more broadly.

Improving oversight of licence holder and health care professional financial relationships

We heard concerns about conflicts of interest between health care professionals and cannabis clinics receiving funding from the cannabis industry, including federal licence holders. For this reason, provincial and territorial regulatory authorities should require health care professionals to disclose any financial relationships with licence holders (for example, whether they receive payments from licence holders in exchange for authorizing specific products).

A century of prohibition significantly limited cannabis research. While some initial investment was made and there have been meaningful improvements in the state of knowledge about cannabis, we believe that insufficient attention and resources have been committed to support research, surveillance and monitoring. Footnote 63 Five years after the legalization of cannabis in Canada, many critical knowledge gaps remain, and some gaps may take decades to close. These gaps will only be filled through continued study of Canadians' experience with legal access to cannabis and of the evolution in social norms associated with this dramatic shift in drug policy.

Identification of knowledge gaps

Some of the knowledge gaps that were raised with us, as noted throughout this report, include:

  • cannabis-related poisonings among children (including the source of the cannabis)
  • the amount of cannabis that constitutes a single serving (that is, a standard dose) to guide consumer decision-making
  • the impacts and effects of cannabis and legalization, including high-potency and novel cannabis products, on mental health (such as psychosis) and substance use in diverse populations
  • the health risks associated with the use of different types of cannabis products, including the emissions of smoked and vaped cannabis
  • the impacts of cannabis use or exposure during different stages of life (including prenatal, perinatal and neonatal exposure; among individuals who are pregnant, breastfeeding or chestfeeding; and among seniors)
  • long-term or longitudinal studies examining consequences of cannabis and legalization (including a focus on youth)
  • the prevalence of people living with cannabis use disorders, and, for those wishing to seek help, their ability to access different types of interventions, including targeted prevention and treatment programs
  • the impact of delivering different types of interventions, including targeted prevention and treatment programs and interventions for frequent consumers and those at risk
  • the impact and effects of cannabis and legalization on First Nations, Inuit and Métis, as well as equity-deserving groups and different subpopulations (including disparities in enforcement)
  • the impacts of different policy approaches by provinces and territories on cannabis use and harms
  • the impacts associated with possible changes to product regulations, including potential modification to the delta-9-tetrahydrocannabinol (THC) limit for edible cannabis products, including the effects on adult consumers, those who might be unintentionally exposed (especially children), and the displacement of the illicit market
  • the use of cannabis for medical purposes, including the benefits and harms associated with using cannabis for different conditions

An additional area for research that was not raised extensively in our consultations but we feel is important to note, is the lack of supports and services for individuals with problematic use or who have cannabis use disorder. We anticipate a need for improved services and treatment, but recognize that cannabis is one of many substances that can lead to problematic use, and that data is lacking on the extent of demand for treatment, the use of treatment services and the efficacy of different interventions. To support further improvements in this area, we would encourage further research on best practices for screening, interventions and treatment for problematic cannabis use and cannabis use disorder.

All of these areas are important. However, we recognize that choices need to be made about which research needs should be prioritized for investment. We encourage the federal departments and agencies involved in funding and using the results of research to work with stakeholders, including those with lived and living experience and from marginalized communities, to identify priorities to guide research activities over the next few years. We understand that the Canadian Centre on Substance Use and Addiction will be convening a workshop with experts in 2024 and suggest that this may be a good place to start a discussion on this topic. Of all these areas, we feel there is an urgent need to examine the factors that are contributing to the observed increases in child poisonings.

Bolstering surveillance and monitoring

In addition to supporting research to fill knowledge gaps, it is important that a robust surveillance system be maintained to monitor the impacts of legalization. This includes the ability to access and use different sources of data, including population surveys, health data, findings of research projects, market data and other information sources that can provide insights into cannabis-related behaviours and cannabis-related health effects over time.

In population surveys and other sources, data on differences between sexes, across age groups and between regions was generally available. However, there was a lack of data available to assess the effects of the new cannabis framework on different racial and ethnic groups, gender minorities, sexual minorities and other subpopulations. We note that additional demographic questions have been, or will be added to some of the data collection tools used by Health Canada and Statistics Canada so that these gaps will be filled to provide better information in the future.

Our understanding of the impacts of cannabis on subpopulations and communities will not improve until sufficiently detailed data is made available to inform research and interpretation of findings.

Surveillance and monitoring activities should also be responsive to the variety of potential impacts of cannabis legalization, including monitoring the state of the cannabis market, social equity impacts and environmental consequences of cannabis legalization (see Chapter 8).

Emphasizing the need for regular reviews of the Cannabis Act

Section 151.1 of the Cannabis Act (the Act) only requires the Minister to cause a single review and does not mandate any future reviews of the implementation or administration of this important piece of legislation. However, it will take years to understand the impact of the Act and other elements of the cannabis framework.

Therefore, we believe the Act should be reviewed at regular intervals by independent experts, to ensure the impacts of the framework are assessed over time. We suggest a 5-year interval for these reviews, and that the Government of Canada amend the Act to require such reviews. Moreover, we believe that there should be some continuity from one review to the next. Our review addressed a number of areas where we made recommendations for reform. The starting point for the next independent review should be to assess the degree of progress made in implementing the recommendations of this review. We would expect Health Canada, in collaboration with other federal departments, to keep track of work done to implement our recommendations and to share this work with the experts leading the next independent review.

As noted in the discussion on social equity in Chapter 8, we believe that an examination of the impact on social equity should be given particular attention in future reviews, in light of historical disparities in cannabis criminalization and the ongoing challenges and inequities faced by marginalized communities.

While periodic reviews of the Act would provide important opportunities to assess progress, we also encourage federal, provincial and territorial governments to evaluate, on an ongoing basis, their cannabis frameworks, including laws, regulations, policies, programs and interventions. Regular evaluation and changes are important to ensure the successful implementation of any initiative. In some instances, it may be appropriate for the monitoring and evaluating to be performed by an independent body. Regardless of the nature of the evaluation, reviews should adequately assess the effectiveness of a given program or initiative to determine if its intended objectives are being met. These evaluations should be made public to ensure transparency and accountability.

Summary of engagement

We engaged with stakeholders between December 2022 and January 2024. We used a range of methods to conduct our engagement. These activities occurred with stakeholders throughout Canada, through one-on-one, sectoral and multi-sectoral meetings conducted in-person, via videoconference and in a hybrid format. We also heard from individuals and organizations who took the time to put their views in writing. While significant effort was made to ensure a broad range of voices were incorporated in our engagement activities, we acknowledge that not all perspectives were heard.

We would like to recognize the many individuals and organizations who shared their time and expertise with us. To protect privacy and confidentiality, individual names will not be disclosed, unless otherwise stated.

We met with over 600 individuals from over 250 organizations in nearly 140 meetings.

The names of all the organizations and experts we engaged with are listed below:

  • 1286455 BC Ltd
  • 420 Cannabis Court
  • Adams Lake Indian Band
  • Afro BudSistas
  • Aitchelitz First Nation
  • Alberta Alliance Who Educates and Advocates Responsibly
  • Alberta Gaming, Liquor and Cannabis Commission
  • Alberta Municipalities
  • Alcohol and Gaming Commission of Ontario
  • All Nations
  • Anishinabek Nation
  • Antidote Processing
  • Dr. Michael Armstrong, Brock University
  • Arthritis Society
  • Assembly of First Nations
  • Association pour la santé publique du Québec
  • Association québécoise de l'industrie du cannabis
  • Atlegay Fisheries
  • AUBE Patients
  • Dr. Lynda Balneaves, University of Manitoba
  • Dr. Daniel Bear, Humber College
  • Dr. Neil Boyd, Simon Fraser University
  • British Columbia Assembly of First Nations
  • Dr. Paula Brown, British Columbia Institute of Technology
  • Dr. Jason Busse, McMaster University
  • C-45 Quality Association
  • CAFCAN: Caribbean African Canadian Social Services
  • Canada House Wellness Group Inc.
  • Canadian Association of Chiefs of Police
  • Canadian Association of Elizabeth Fry Societies
  • Canadian Centre for Policy Alternatives
  • Canadian Chamber of Commerce
  • Canadian Health Food Association
  • Canadian Hemp Farmers Alliance
  • Canadian Hemp Trade Alliance
  • Canadian Mental Health Association
  • Canadian Paediatric Society
  • Canadian Pharmacists Association
  • Canadian Police Association
  • Canadian Psychological Association
  • Canadian Public Health Association
  • Canadian Students for Sensible Drug Policy
  • Canadian Therapeutic Cannabis Partners Society
  • Canadian Vaping Association
  • Canadian Women in Cannabis
  • Cannabis Council of Canada
  • Cannabis Health Products Coalition
  • Cannabis NB
  • Cannaworld Ventures
  • Cannibble Foodtech Ltd.
  • Canopy Growth Corporation
  • Dr. Alexander Caudarella, Canadian Centre on Substance Use and Addiction
  • Centre for Addiction and Mental Health
  • Centre on Drug Policy Evaluation
  • Chiefs of Ontario
  • City of Calgary
  • City of Toronto
  • City of Yellowknife
  • Dr. Hance Clarke, University Health Network
  • CommPharm Consulting
  • Community Futures Central Kootenay
  • Dr. Cecilia Costiniuk, McGill University
  • Council of Yukon First Nations
  • Covenant House
  • Data Communications Management
  • Dr. David Décary-Hétu, Université de Montréal
  • Diplomat Consulting
  • DiversityTalk
  • Dr. Jennifer Donnan, Memorial University of Newfoundland and Labrador
  • Ekosi Health
  • Faded Living 420
  • Federation of Sovereign Indigenous Nations
  • Dr. Yaron Finkelstein, University of Toronto, The Hospital for Sick Children
  • Fire & Flower Holdings Corp.
  • First Nations Leadership Council
  • Food, Health & Consumer Products of Canada
  • Dr. Chelsea Gabel, McMaster University
  • Government of Alberta
  • Government of British Columbia
  • Government of Canada (Canada Border Services Agency)
  • Government of Canada (Canada Revenue Agency)
  • Government of Canada (Canadian Institutes of Health Research)
  • Government of Canada (Department of Justice Canada)
  • Government of Canada (Finance Canada)
  • Government of Canada (Health Canada)
  • Government of Canada (Innovation, Science and Economic Development Canada)
  • Government of Canada (Privy Council Office)
  • Government of Canada (Public Health Agency of Canada)
  • Government of Canada (Public Prosecution Service of Canada)
  • Government of Canada (Public Safety Canada)
  • Government of Canada (Royal Canadian Mounted Police)
  • Government of Canada (Statistics Canada)
  • Government of Canada (Veterans Affairs Canada)
  • Government of Manitoba
  • Government of New Brunswick
  • Government of Newfoundland and Labrador
  • Government of Northwest Territories
  • Government of Nova Scotia
  • Government of Nunavut
  • Government of Ontario
  • Government of Prince Edward Island
  • Government of Quebec
  • Government of Saskatchewan
  • Government of Yukon
  • Great Gardener Farms
  • Dr. Lorraine Greaves, Centre of Excellence for Women's Health
  • Green Wynds Farm Ltd
  • Greenleaf Medical Clinic
  • GreenPort Global
  • Greentone Cannabis
  • Gwa'sala-Nakwaxda'xw
  • Habitus Consulting Collective
  • Haisla Nation
  • Dr. David Hammond, University of Waterloo
  • High Hopes Foundation
  • High Tide Inc.
  • Dr. Carol Hopkins, Thunderbird Partnership Foundation
  • Amy House, York University
  • HRVSTR Cannabis Inc.
  • Dr. Elaine Hyshka, University of Alberta, Royal Alexandra Hospital
  • Institut national de santé publique du Québec
  • Inuit Tapiriit Kanatami
  • Inuvialuit Regional Corporation
  • Israeli Medical Cannabis Agency
  • IWK Health Centre
  • John Howard Society of Canada
  • John Howard Society of Ontario
  • Justice for Children and Youth
  • Dr. Didier Jutras-Aswad, Centre hospitalier de l'Université de Montréal
  • Kahnawà:ke Policing Functions
  • Kahnawà:ke Shakotiia'takehnhas Community Services
  • Dr. Lauren Kelly, The Canadian Collaborative for Childhood Cannabinoid Therapeutics
  • Khowutzun Development Corporation – Cowichan Tribes
  • Dr. Beau Kilmer, RAND Drug Policy Research Center
  • Kootenay Aeroponic
  • Kwaw-kwaw-Apilt First Nations
  • Labstat International
  • Lasqueti Cannabis Corp
  • Claude Lavoie
  • Les Femmes Michif Otipemisiwak
  • Liquor, Gaming and Cannabis Authority of Manitoba
  • London Drugs Commission
  • Los Angeles Department of Cannabis Regulation
  • Dr. James MacKillop, McMaster University
  • Manitoba Liquor and Lotteries
  • Manitoba Métis Federation
  • Media Smarts
  • Medical Cannabis Canada
  • Mental Health Commission of Canada
  • Métis Nation – British Columbia
  • Métis Nation of Alberta
  • Métis Nation of Ontario
  • Métis Nation – Saskatchewan
  • Métis National Council
  • Mohawk Council of Akwesasne
  • Mohawk Council of Kahnawà:ke
  • Munsee-Delaware Nation
  • Mynd Life Sciences
  • Nanoose First Nation
  • Nathan Richards Legal
  • National Association of Pharmacy Regulatory Authorities
  • National Indigenous Economic Development Board
  • Neskonlith Indian Band
  • New Jersey Cannabis Regulatory Commission
  • New York Office of Cannabis Management
  • Nipissing First Nation
  • NORML Canada
  • Nunalituqait Ikajuqatigiitut Inuit Association
  • Nunatsiavut Government
  • Nunavik Health Board
  • Nunavik Police Services
  • Nunavik Regional Board of Health and Social Services
  • Nunavut Tunngavik Incorporated
  • Oceanic Releaf
  • Okanagan Indian Band
  • Okpik Consulting
  • Ontario Cannabis Store
  • Ontario Provincial Police
  • Ontario Public Health
  • Origine Nature
  • Eugene Oscapella, University of Ottawa
  • Ottawa Inner City Health
  • Ottawa Public Health
  • Dr. Akwasi Owusu-Bempah, University of Toronto
  • Dr. Rosalie Pacula, University of Southern California, International Society for the Study of Drug Policy
  • Partners for Youth Inc.
  • Pauktuutit Inuit Women of Canada
  • Penticton Indian Band
  • Pine River Institute
  • Premo Packaging and Design Co.
  • Pure Sunfarms
  • Qarjuit Youth Council
  • Québec Craft Cannabis
  • Dr. Andrew Reid, Douglas College
  • Retail Cannabis Council of Ontario
  • Retired Ontario Court of Justice
  • Rosebud Cannabis Farms
  • Royal College of Physicians and Surgeons of Canada
  • Samson Cree Nation
  • Santé Cannabis
  • Saskatchewan Liquor and Gaming Authority
  • Secluded Wellness Centre
  • Service de police de la Ville de Gatineau
  • Shoppers Drug Mart Inc.
  • Shxwhà:y Village
  • Shxw'ōwhámel First Nation
  • Siska Indian Band
  • Six Nations Cannabis Commission
  • Six Nations of the Grand River
  • Six Nations Police
  • SOLID Outreach
  • Squamish Nation
  • Sûreté du Québec
  • Sweetgrass Trading
  • Tantalus Labs
  • The Cannabis Nurses
  • The Cronos Group
  • Dr. Phil Tibbo, Dalhousie University
  • Timixw Holdings
  • Tl'azt'en Nation
  • TRACE Youth Cannabis Research Program
  • Transform Drug Policy Foundation
  • Ts'il Kaz Koh First Nation
  • Tyendinaga (Mohawks of the Bay of Quinte)
  • Tyendinaga Police Service
  • Union of British Columbia Indian Chiefs
  • Upstream Ottawa
  • Valhalla Craft Cannabis
  • Victoria Cannabis Buyers Club
  • Victoria Cannabis Company
  • Village Bloomery
  • Ville de Laval
  • Washington State Liquor and Cannabis Board
  • We Wai Kai Nation
  • Weaving Wellness Centre
  • Western Arctic Youth Collective
  • Wholeland Enterprises
  • Wikwemikong
  • Williams Lake First Nation
  • World Class Extractions
  • YMCA Youth Cannabis Awareness Program
  • Youth Leadership Team (Tobacco Control and Vaping)

Morris Rosenberg (Chair)

Morris Rosenberg, C.M., is a Canadian lawyer and former senior civil servant with the Government of Canada.

Mr. Rosenberg served as Deputy Minister of Foreign Affairs (2010–2013), Deputy Minister of Health (2004–2010), and Deputy Minister of Justice and Deputy Attorney General of Canada (1998–2004). He began his public service career with the Department of Justice in 1979. From 1989–1993, he served as Assistant Deputy Minister in the Department of Consumer and Corporate Affairs. From 1993–1996, he served as Assistant Secretary to the Cabinet, Economic and Regional Development Policy, Privy Council Office. He was appointed Deputy Secretary to the Cabinet (Operations) in 1996. After retiring from the government in 2013, Mr. Rosenberg served as President and CEO of the Pierre Elliott Trudeau Foundation from 2014–2018.

Mr. Rosenberg holds a B.A. from McGill University, an LL.L. from the  Université de Montréal  and an LL.M. from Harvard University. He was appointed Member of the Order of Canada in 2015.

Dr. Oyedeji Ayonrinde

Dr. Oyedeji Ayonrinde is an Associate Professor in the departments of Psychiatry and Psychology at Queen's University. He is also a Consultant Psychiatrist and Clinical Director at Providence Care, where he has provided community mental health care over the past five years. Prior to these roles, he was a consultant at the Bethlem Royal and Maudsley Hospitals (UK) and lectured at the Institute of Psychiatry for nearly 20 years. He holds a specialist Fellowship in both general Psychiatry and Addictions from the Royal College of Psychiatrists (UK), an MSc (Research in Psychiatry) from University College London, and an Executive MBA from Imperial College, London. Dr. Ayonrinde is a member of the Canadian Psychiatric Association, Fellow of the American Psychiatric Association and Royal College of Psychiatrists. His peer-reviewed publications focus on risks with gestational cannabis use, cannabis and psychosis, and safety issues with cannabinoid-based medicines. Dr. Ayonrinde has received healthcare and university education awards, as well as national and international awards for cannabis-related scholarship.

Dr. Patricia J. Conrod

Dr. Conrod is a registered clinical psychologist, a Full Professor in the Department of Psychiatry and Addiction at the University of Montreal, and researcher at the Sainte-Justine Mother and Child University Hospital Centre (CHUSJ), where she holds a Tier 1 Canada Research Chair in Preventative Mental Health and Addiction and runs a research laboratory focusing on understanding, preventing and treating neurodevelopmental risk factors and consequences of substance use and misuse. She co-leads the Fonds de recherche du Québec (FRQS) Research Network on Suicide, Mood Disorders and Related Conditions, the Canadian Institutes of Health Research (CIHR) Canadian Cannabis and Psychosis Research Team, and the CHUSJ IMAGINE Centre for pediatric neuroimaging. She is also Director of the University of Montreal Neuroscience and Mental Health Strategy. She holds a PhD in Psychology (clinical) from McGill University and has published over 247 articles.

Lynda L. Levesque

Lynda Levesque is a proud nehiyaw iskwew and member of the Fisher River Cree Nation in Manitoba, Treaty Five territory.

Ms. Levesque is a criminal lawyer, with experience practicing from both the prosecution and defence perspectives. Since 2018, she has worked as a Crown Prosecutor in Calgary and surrounding rural areas. From 2014–2018, she worked as a duty counsel lawyer with Legal Aid Alberta, serving Calgary and surrounding rural areas. From 2005–2014, she worked as a duty counsel lawyer with Legal Aid Ontario in Toronto. Throughout her legal career, she has maintained a passion for Indigenous justice issues and an interest in better ensuring access to justice for marginalized persons.

Ms. Levesque holds a B.A. from the University of Calgary and an LL.B. from the University of Windsor.

Dr. Peter Selby

Dr. Selby is the Giblon Professor, Vice Chair of Research, and Advisor to the Head of the Mental Health and Addictions Division in the Department of Family and Community Medicine, University of Toronto. He is cross appointed in the departments of Psychiatry and the School of Public Health. As a Senior Scientist at CAMH, his research focuses on innovative methods to understand and treat addictive behaviours and their comorbidities. To support these research initiatives, Dr. Selby has received grants totaling over 100 million dollars from the Canadian Institutes of Health Research, the National Institutes of Health, the Ministry of Health, as well as others. Dr. Selby has held more than 145 grants as Principal or Co-Principal Investigator. He has more than 150 peer-reviewed publications, including 74 as first or senior author. He is also an expert presenter and educator in addiction and mental health especially in primary care and community settings.

A distinctions-based approach acknowledges that each community has a unique culture, territory, history and relationship with the Government of Canada, as well as unique strengths to build on and challenges to face. A distinctions-based approach means working independently with First Nations Peoples, Inuit, Métis Peoples and Intersectional Peoples in recognition of their unique attributes.

Return to footnote 1 referrer

SGBA Plus is an analytical process that uses an intersectional approach to assess how factors such as sex, gender, age, race, ethnicity, socioeconomic status, disability, sexual orientation, cultural background, migration status and geographic location interact and intersect with each other and broader systems of power.

Return to footnote 2 referrer

The Task Force on Cannabis Legalization and Regulation. (2016). A Framework for the Legalization and Regulation of Cannabis in Canada . Retrieved from https://www.canada.ca/content/dam/hc-sc/healthy-canadians/migration/task-force-marijuana-groupe-etude/framework-cadre/alt/framework-cadre-eng.pdf.

Return to footnote 3 referrer

Indigenous affiliation can include: any person or persons of First Nation, Inuit or Métis descent and any community, corporation or business associated with a First Nation, Inuit and Métis government, organization or community.

Return to footnote 4 referrer

THC refers to delta-9-tetrahydrocannabinol, the cannabinoid mainly responsible for the psychoactive and intoxicating effects of cannabis.

Return to footnote 5 referrer

More information on the legislative and regulatory controls designed to minimize the harms associated with cannabis use can be found in Chapter 5.

Return to footnote 6 referrer

The Cannabis Act defines a young person as an individual who is under 18 years of age and establishes criminal prohibitions for possession of more than 5 grams of dried cannabis (or its equivalent in other classes of cannabis) by a young person. Provinces and territories can establish higher age limits; most jurisdictions have established a minimum legal age of 19, except Alberta (age 18) and Quebec (age 21).

Return to footnote 7 referrer

Varin, M., Champagne, A., Venugopal, J., Li, L., McFaull, S. R., Thompson, W., Toigo, S., Graham, E., & Lowe, A.-M. (2023). Trends in cannabis-related emergency department visits and hospitalizations among children aged 0–11 years in Canada from 2015 to 2021: spotlight on cannabis edibles. BMC Public Health (23, 1). https://doi.org/10.1186/s12889-023-16987-9.

Return to footnote 8 referrer

Health Canada. (2024). Canadian Cannabis Survey 2023: Summary . Retrieved from https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/canadian-cannabis-survey-2023-summary.html.

Return to footnote 9 referrer

Health Canada monitors the percentage of youth (grade 10-12) who report frequent (daily to weekly) cannabis use in the past 30 days as part of public reporting of departmental results. However, this reporting does not identify or establish targets to reduce youth and young adult cannabis use. See: https://www.canada.ca/en/health-canada/corporate/transparency/corporate-management-reporting/departmental-performance-reports/2022-2023-departmental-results-report.html.

Return to footnote 10 referrer

Fischer, B., Russell, C., Sabioni, P., van den Brink, W., Le Foll, B., Hall, W., Rehm, J., & Room, R. (2017). Lower-Risk Cannabis Use Guidelines: A Comprehensive Update of Evidence and Recommendations. American Journal of Public Health (Vol. 107, Issue 8, pp. e1–e12). https://doi.org/10.2105/ajph.2017.303818.

Return to footnote 11 referrer

Fischer, B., Robinson, T., Bullen, C., Curran, V., Jutras-Aswad, D., Medina-Mora, M. E., Pacula, R. L., Rehm, J., Room, R., Brink, W. van den, & Hall, W. (2022). Lower-Risk Cannabis Use Guidelines (LRCUG) for reducing health harms from non-medical cannabis use: A comprehensive evidence and recommendations update. International Journal of Drug Policy (Vol. 99, p. 103381). https://doi.org/10.1016/j.drugpo.2021.103381.

Return to footnote 12 referrer

More information on efforts to disseminate information can be found in Chapters 5 and 6 of our What We Heard Report . See: https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/laws-regulations/cannabis-act-legislative-review/expert-panel/legislative-review-cannabis-act-report.html.

Return to footnote 13 referrer

Brief, personality-targeted, cognitive-behavioral interventions refer to therapeutic approaches that focus on addressing specific aspects of an individual's personality, often in a time-limited and structured manner. These interventions combine principles from cognitive-behavioral therapy with a targeted emphasis on personality traits and patterns.

Return to footnote 14 referrer

THC is an intoxicating cannabinoid, whereas CBD is not intoxicating but does have psychoactive effects. See Appendix A for more information.

Return to footnote 15 referrer

Myran, D. T., Pugliese, M., Roberts, R. L., Solmi, M., Perlman, C. M., Fiedorowicz, J., Tanuseputro, P., & Anderson, K. K. (2023). Association between non-medical cannabis legalization and emergency department visits for cannabis-induced psychosis.  Molecular psychiatry , 1-10. https://doi.org/10.1038/s41380-023-02185-x.

Return to footnote 16 referrer

Myran, D. T., Gaudreault, A., Konikoff, L., Talarico, R., & Pacula, R. L. (2023). Changes in cannabis-attributable hospitalizations following nonmedical cannabis legalization in Canada.  JAMA network open ,  6 (10), e2336113-e2336113. https://doi.org/10.1001/jamanetworkopen.2023.36113.

Return to footnote 17 referrer

Cannabinoids are a group of structurally-related chemical compounds initially identified in the Cannabis sativa plant.

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More information on the provincial, territorial and municipal roles and authorities can be found in Chapter 5.

Return to footnote 19 referrer

More information on the core promotion, packaging and labelling controls can be found in Chapter 5.

Return to footnote 20 referrer

THCA (delta-9-tetrahydrocannabinolic acid) is the non-active cannabinoid precursor to THC found in raw cannabis, which converts to THC when heated.

Return to footnote 21 referrer

In this context, terpenes are naturally occurring aromatic chemical compounds found in cannabis plants. Terpenes contribute to the smell and taste of different strains of cannabis.

Return to footnote 22 referrer

Trauma-informed refers to approaches that recognize the connection between trauma and negative health outcomes and behaviours. These approaches aim to minimize the potential for harm and re-traumatization, and to enhance safety, control and resilience for those involved.

Return to footnote 23 referrer

Health Canada. (2023). Data on commercial cannabis licence applications and licences . Retrieved from https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/commercial-applications-licences.html.

Return to footnote 24 referrer

Return to footnote 25 referrer

Lamers, M. (2023, February 24). Indigenous cannabis entrepreneurs underrepresented in Canada, data suggests. MJBizDaily . Retrieved from https://mjbizdaily.com/indigenous-cannabis-entrepreneurs-underrepresented-in-canada/.

Return to footnote 26 referrer

The child welfare legislation ( An Act respecting First Nations, Inuit and Métis children, youth and families , see https://laws-lois.justice.gc.ca/eng/acts/f-11.73/FullText.html) affirms the rights of First Nations, Inuit and Métis to self-government, which includes jurisdiction in relation to child and family services. The legislation ensures that decisions or actions in respect of providing child and family services must be done in accordance with principles set out at the national level, including the principle of the best interests of the child. It includes a set of factors to be considered when making this determination, including the child's needs and the child's preferences. This child welfare legislation is an example of legislation that supports Indigenous groups, communities or people to determine their own solutions for their children and families. It provides for the exercise of this jurisdiction, resulting in First Nations, Inuit and Métis laws prevailing over federal laws and laws of provinces and territories (in situations where the group, community or people requests to enter into a tripartite agreement with the federal government and the relevant provinces and territorial governments). For further detail, see: Affirming and recognizing Indigenous jurisdiction over child and family services: An Act respecting First Nations, Inuit and Métis children, youth and families https://www.canada.ca/en/indigenous-services-canada/news/2019/06/an-act-respecting-first-nations-inuit-and-metis-children-youth-and-families-has-received-royal-assent.html.

Return to footnote 27 referrer

New proposed legislation ( Bill C-61, An Act respecting water, source water, drinking water, wastewater and related infrastructure on First Nation lands, see: https://www.parl.ca/DocumentViewer/en/44-1/bill/C-61/first-reading) affirms the inherent right of First Nations to self-government, which includes jurisdiction in relation to drinking water, wastewater and related infrastructure on First Nation lands. This proposed legislation sets out principles, such as reliable access to water services and substantive equality, to guide the provision of clean and safe drinking water for First Nations and the effective treatment and disposal of wastewater on First Nation lands. It would establish minimum national standards for the delivery of drinking water and wastewater services on First Nation lands, based on First Nation choice (that is, the First Nations governing body can choose to meet the Guidelines for Canadian Drinking Water Quality or the drinking water standards of the province or territory where their lands are located). For further detail, see: Bill C-61: First Nations Clean Water Act (short title), or an Act respecting water, source water, drinking water, wastewater and related infrastructure on First Nation lands https://www.canada.ca/en/indigenous-services-canada/news/2023/12/bill-c--first-nations-clean-water-act-short-title-or-an-act-respecting-water-source-water-drinking-water-wastewater-and-related-infrastructure-on-f.html.

Return to footnote 28 referrer

Attorney General of Québec, et al. v. Attorney General of Canada, et al. , 2024 SCC 5. See: https://decisions.scc-csc.ca/scc-csc/scc-csc/en/item/20264/index.do.

Return to footnote 29 referrer

A micro-cultivation licence allows licence holders to produce cannabis plants and seeds, fresh and dried cannabis within a grow surface area (plant canopy) of up to 200 square metres. A micro-processing licence allows licence holders to produce all types of cannabis; these licence holders can possess up to 600 kilograms of dried cannabis (or its equivalent amount) in a calendar year.

Return to footnote 30 referrer

Statistics Canada. (2023). Detailed household final consumption expenditure, provincial and territorial, annual (x 1,000,000) . Retrieved from: https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=3610022501.

Return to footnote 31 referrer

Separate from Health Canada's cannabis licensing regime, under the excise duty framework, companies that cultivate, produce or package cannabis must obtain a Canada Revenue Agency cannabis licence, with corresponding obligations to report and pay taxes. For more information, see: https://www.canada.ca/en/revenue-agency/campaigns/cannabis-taxation.html.

Return to footnote 32 referrer

Farmgate programs allow a licensed processor of cannabis to operate a retail storefront that allows customers to purchase cannabis products directly from the processor.

Return to footnote 33 referrer

Tax policy, including excise taxes, is developed and evaluated by Finance Canada.

Return to footnote 34 referrer

At the time of legalization, the retail price of dried cannabis was approximately $10 per gram. Retail prices have decreased substantially over time and consequently, the excise tax represents a larger share of the price.

Return to footnote 35 referrer

Return to footnote 36 referrer

Cannabis biomass generally refers to the stalks, stems and leaves of the plant.

Return to footnote 37 referrer

In developing this program, the department should establish social equity eligibility criteria to ensure the program is not exploited (such as through the provision of false information or the misrepresentation of eligibility) by those not from under-represented groups.

Return to footnote 38 referrer

Health Canada requires applicants to submit evidence that demonstrates that they have a site which is fully built and meets all applicable requirements of the Cannabis Regulations at the time of application. See: https://laws-lois.justice.gc.ca/eng/Regulations/SOR-2018-144/FullText.html.

Return to footnote 39 referrer

The Black Entrepreneurship Loan Fund is a partnership between the Government of Canada, Black-led business organizations and the Business Development Bank of Canada providing a total of $160 million to support Black entrepreneurs and business owners. For more information, see: https://ised-isde.canada.ca/site/black-entrepreneurship-program/en/black-entrepreneurship-loan-fund-frequently-asked-questions.

Return to footnote 40 referrer

The legislation that made these amendments is entitled An Act to provide no-cost, expedited record suspensions for simple possession of cannabis. See: https://laws-lois.justice.gc.ca/eng/annualstatutes/2019_20/FullText.html.

Return to footnote 41 referrer

A record suspension is a means of keeping records separate and apart from other criminal records so that they will no longer show up in a criminal record search.

Return to footnote 42 referrer

As of December 2023, the Parole Board of Canada had ordered 798 suspensions, out of approximately 1200 applications received. The Government of Canada had previously estimated that 10,000 Canadians would be eligible.

Return to footnote 43 referrer

The enabling legislation for this process is An Act to amend the Criminal Code and the Controlled Drugs and Substances Act. See: https://laws-lois.justice.gc.ca/eng/annualstatutes/2022_15/FullText.html.

Return to footnote 44 referrer

A record sequestration is similar to a record suspension, in that it keeps records separate and apart from other criminal records so that they will no longer show up in a criminal record search. However, sequestrations are automatic; that is, they do not require applications.

Return to footnote 45 referrer

More information on the legislative and regulatory measures that control access to cannabis for adults of legal age can be found in Chapter 5.

Return to footnote 46 referrer

Pepin, L. C., Simon, M. W., Banerji, S., Leonard, J., Hoyte, C. O., & Wang, G. S. (2023). Toxic Tetrahydrocannabinol (THC) Dose in Pediatric Cannabis Edible Ingestions. Pediatrics , 152(3). https://doi.org/10.1542/peds.2023-061374.

Return to footnote 47 referrer

Ingestible cannabis extracts refers to a subcategory of products with some characteristics that are similar to edible cannabis products. In 2023, Health Canada issued guidance for licence holders to help them determine whether products are considered edible cannabis, and thus subject to a limit of 10 milligrams of THC per package, or extracts, which have a limit of 1000 milligrams of THC per package, but more restrictions on the ingredients that can be used to manufacture them. See Classification of edible cannabis for more information https://www.canada.ca/en/health-canada/services/cannabis-regulations-licensed-producers/classification-edible-cannabis.html.

Return to footnote 48 referrer

Hammond, D., Corsetti, D., Fataar, F., Iraniparasat, M., Danh Hong, D., Burkhalter, R. (2023 ). International Cannabis Policy Study – Canada 2022 Cannabis Report . June 2023. Retrieved from https://cannabisproject.ca/wp-content/uploads/2023/06/2022-Canada-Report-June-26.pdf.

Return to footnote 49 referrer

Wadsworth, E., Rynard, V., Driezen, P., Freeman, T. P., Rychert, M., Wilkins, C., Hall, W., Gabrys, R. & Hammond, D. (2023). Legal sourcing of ten cannabis products in the Canadian cannabis market, 2019–2021: a repeat cross-sectional study. Harm Reduction Journal , 20, 19. https://doi.org/10.1186/s12954-023-00753-6.

Return to footnote 50 referrer

More information on these measures can be found in Chapter 5.

Return to footnote 51 referrer

Law enforcement is responsible for enforcing the criminal offences set out in the Cannabis Act , such as offences related to unauthorized sale or unauthorized production. These criminal offences carry the full range of criminal sanctions, including incarceration, as described in Chapter 5. In comparison, Health Canada is responsible for regulatory enforcement, which involves monitoring the compliance of licence holders and other regulated parties with rules that relate to their authorized activities (for example, rules related to how products must be labelled). Regulatory enforcement tools include warning letters, public advisories, product recalls, administrative monetary penalties, licence suspensions and licence revocations.

Return to footnote 52 referrer

According to the Canadian Substance Use Costs and Harms 2007-2020 report, cannabis-related costs of policing, courts and correctional services fell from $1.6 billion in 2017 to just over $1 billion in 2020. See: https://csuch.ca/documents/reports/english/Canadian-Substance-Use-Costs-and-Harms-Report-2023-en.pdf.

Return to footnote 53 referrer

Statistics Canada. (2024). Detailed household final consumption expenditure, Canada, quarterly (x 1,000,000) . Retrieved from https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610012401.

Return to footnote 54 referrer

Health Canada. (2024). Canadian Cannabis Survey 2023 Data Tables. Retrieved from https://epe.bac-lac.gc.ca/100/200/301/pwgsc-tpsgc/por-ef/health/2023/149-22-e/index.html.

Return to footnote 55 referrer

Government of British Columbia. (2023). Community Safety Unit - cannabis enforcement . Retrieved from https://www2.gov.bc.ca/gov/content/safety/public-safety/csu.

Return to footnote 56 referrer

The public possession limit for medical purposes is up to 150 grams of dried cannabis or its equivalent in other classes of cannabis, compared to the 30 gram public possession limit for adults.

Return to footnote 57 referrer

In this case a health care professional means a medical practitioner or nurse practitioner.

Return to footnote 58 referrer

Health Canada. (2024). Data on cannabis for medical purposes. Retrieved from https://www.canada.ca/en/health-canada/services/drugs-medication/cannabis/research-data/medical-purpose.html.

Return to footnote 59 referrer

Health Canada. (2023). Unpublished analysis of data on cannabis for medical purposes .

Return to footnote 60 referrer

Health Canada. (2024). The Canadian Cannabis Survey 2023. Retrieved from https://epe.bac-lac.gc.ca/100/200/301/pwgsc-tpsgc/por-ef/health/2023/149-22-e/index.html.

Return to footnote 61 referrer

Veterans Affairs Canada. (2022). Veterans Affairs Canada Statistics – Facts and Figures, Health Care Programs. Retrieved from https://www.veterans.gc.ca/eng/about-vac/news-media/facts-figures/5-0.

Return to footnote 62 referrer

In this context, the term surveillance refers to the systematic collection, analysis and reporting of data (including data about the market and industry) related to public health and public safety consequences of cannabis and cannabis use.

Return to footnote 63 referrer

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U.S. signs off on more bombs, warplanes for Israel

Despite a widening rift with the israeli government, the biden administration continues to authorize the transfer of 2,000-pound bombs and other weapons.

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The Biden administration in recent days quietly authorized the transfer of billions of dollars in bombs and fighter jets to Israel despite Washington’s concerns about an anticipated military offensive in southern Gaza that could threaten the lives of hundreds of thousands of Palestinian civilians.

The new arms packages include more than 1,800 MK84 2,000-pound bombs and 500 MK82 500-pound bombs, according to Pentagon and State Department officials familiar with the matter. The 2,000-pound bombs have been linked to previous mass-casualty events throughout Israel’s military campaign in Gaza. These officials, like some others, spoke to The Washington Post on the condition of anonymity because recent authorizations have not been disclosed publicly.

The development underscores that while rifts have emerged between the United States and Israel over the war’s conduct, the Biden administration views weapons transfers as off-limits when considering how to influence the actions of Prime Minister Benjamin Netanyahu.

“We have continued to support Israel’s right to defend itself,” said a White House official. “Conditioning aid has not been our policy.”

Israel-Gaza war

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Some Democrats, including allies of President Biden , say the U.S. government has a responsibility to withhold weapons in the absence of an Israeli commitment to limit civilian casualties during a planned operation in Rafah, a final Hamas stronghold, and ease restrictions on humanitarian aid into the enclave, which is on the brink of famine.

“The Biden administration needs to use their leverage effectively and, in my view, they should receive these basic commitments before greenlighting more bombs for Gaza,” Sen. Chris Van Hollen (D-Md.) said in an interview. “We need to back up what we say with what we do.”

The Israeli government declined to comment on the authorizations.

Four Hamas battalions remain in Rafah, say U.S. and Israeli officials. More than 1.2 million Palestinians have sought shelter there after being forced from their homes during Israel’s extensive bombing campaign over the past five months. Biden suggested that a scorched-earth invasion of the city along Gaza’s border with Egypt would cross a “ red line ” for him.

Biden requested that Netanyahu send a team of security officials to Washington this week to listen to U.S. proposals for limiting the bloodshed. Netanyahu canceled the visit after the United States refused to veto a United Nations Security Council resolution that called for a temporary cease-fire in Gaza and the release of hostages, but which did not condemn Hamas.

Israeli officials have not allayed U.S. concerns about the impending operation in Rafah, but they agreed to reschedule the meeting in Washington, the White House said.

The increasingly public spat has not dissuaded Biden from rushing weapons and military equipment into the conflict. Last week, the State Department authorized the transfer of 25 F-35A fighter jets and engines worth roughly $2.5 billion, U.S. officials said. The case was approved by Congress in 2008, so the department was not required to provide a new notification to lawmakers.

The MK84 and MK82 bombs authorized this week for transfer also were approved by Congress years ago but had not yet been fulfilled.

Washington’s marginalization on the world stage over its support for Israel has rankled some Democrats in Congress, some of whom have called for more transparency in arms transfers and raised questions about whether the authorization of older unfilled cases is an effort to avoid new notifications to Congress, which could face scrutiny.

When asked about the transfers, a State Department official said that “fulfilling an authorization from one notification to Congress can result in dozens of individual Foreign Military Sales cases across the decades-long life-cycle of the congressional notification.”

“As a matter of practicality, major procurements, like Israel’s F-35 program for example, are often broken out into several cases over many years,” the official added.

The 2,000-pound bombs, capable of leveling city blocks and leaving craters in the earth 40 feet across and larger, are almost never used anymore by Western militaries in densely populated locations due to the risk of civilian casualties.

Israel has used them extensively in Gaza, according to several reports , most notably in the bombing of Gaza’s Jabalya refugee camp Oct. 31. U.N. officials decried the strike, which killed more than 100 people, as a “disproportionate attack that could amount to war crimes.” Israel defended the bombing, saying it resulted in the death of a Hamas leader.

Israeli officials deny that their military campaign has been indiscriminate and say civilian casualties are the fault of Hamas for embedding its fighters among the population in Gaza.

Biden’s decision to continue the flow of weapons to Israel has been strongly supported by powerful pro-Israel interest groups in Washington, including the American Israel Public Affairs Committee, which is spending tens of millions of dollars this election cycle to unseat Democrats it views as insufficiently pro-Israel.

AIPAC, alongside congressional Republicans and several Democrats, oppose any conditions on U.S. military assistance to Israel. “The U.S. can protect civilians, on both sides of the conflict, by continuing to ensure Israel receives as much U.S. assistance as is needed, as expeditiously as possible, to keep its stockpiles full of lifesaving munitions,” Reps. August Pfluger (R-Tex.) and Don Davis (D-N.C.), and Michael Makovsky, president of the Jewish Institute for National Security of America, wrote in a recent column . “Doing so is also morally right and in the U.S. interest.”

Biden’s recurring approvals of weapons transfers are an “abrogation of moral responsibility, and an assault on the rule of law as we know it, at both the domestic and international levels,” said Josh Paul, a former State Department official involved in arms transfers who resigned in protest of Biden’s Gaza policy.

“This is a policymaking process that is fundamentally broken, and which makes everyone from policymaking officials to defense manufacturers to the U.S. taxpayer complicit in Israel’s war crimes,” he said.

The Post’s reporting on the new weapons authorizations follows a visit to Washington by Israeli Defense Minister Yoav Gallant this week in which he requested that the Biden administration expedite a range of weaponry.

Gen. Charles Q. Brown Jr., chairman of the Joint Chiefs of Staff, told reporters Thursday that Israeli officials have been asking for weapons they consider important “in pretty much every meeting” he has been in with them.

Israel has “not received everything they’ve asked for,” Brown said. The United States has withheld some, he said, either due to capacity limits or because U.S. officials were not willing at the time. Brown did not identify the weapons.

Hours later, the Pentagon clarified Brown’s remarks, highlighting the issue’s sensitivity. Navy Capt. Jereal Dorsey, a spokesman for the general, said there has been no change in policy and that the United States assesses its stockpiles as it provides aid to partners. “The United States continues to provide security assistance to our ally Israel as they defend themselves from Hamas,” Dorsey said.

Advocates of the policy inside the administration say behind-the-scenes discussions with the Israelis have succeeded in delaying the country’s Rafah operation, which they now don’t expect to happen until May. But at least part of that delay is due to Israel’s military operations in Khan Younis taking longer than anticipated.

More than 32,000 Palestinians have been killed, according to the Gaza Health Ministry, since the war began in response to the Oct. 7 cross-border attack in which Hamas militants killed 1,200 people in Israel and took at least 250 hostage.

Any increase in fighting in Rafah, a key transit point for humanitarian aid, risks exacerbating conditions across the enclave that the United Nations and aid groups say is suffering from chronic shortages of food, water and medicine. A massive influx of aid trucks is required to remedy the situation, but U.S. officials say Israel has imposed onerous restrictions on deliveries, which are deeply unpopular inside Netanyahu’s far-right coalition government.

The Biden administration does not see that its words and actions are in conflict with respect to weapons transfers, Van Hollen said.

“They do not see the contradiction between sending more bombs to the Netanyahu government even as it is ignoring their demands with respect to Rafah and getting more humanitarian assistance to starving people,” he said. “If this is a partnership it needs to be a two-way street.”

Dan Lamothe contributed to this report.

An earlier version of this article misidentified Michael Makovsky as a fellow at the Washington Institute think tank. He is the president of the Jewish Institute for National Security of America. The article has been corrected.

Israel-Gaza war: Secretary of State Antony Blinken is set to make a quick stop in Israel as tensions are rising between the United States and Israel over Israeli Prime Minister Benjamin Netanyahu’s plans to invade Rafah . The Israeli military said Wednesday that it was continuing its raid on al-Shifa Hospital in Gaza City, where people said they were trapped in dire conditions.

Middle East conflict: Tensions in the region continue to rise. As Israeli troops aim to take control of the Gaza-Egypt border crossing, officials in Cairo warn that the move would undermine the 1979 peace treaty. Meanwhile, there’s a diplomatic scramble to avert full-scale war between Israel and Lebanon .

U.S. involvement: U.S. airstrikes in Iraq and Syria killed dozens of Iranian-linked militants , according to Iraqi officials. The strikes were the first round of retaliatory action by the Biden administration for an attack in Jordan that killed three U.S. service members .

  • Republicans hug Netanyahu tighter as Democratic tensions with Israel war strategy boil March 20, 2024 Republicans hug Netanyahu tighter as Democratic tensions with Israel war strategy boil March 20, 2024
  • Blinken begins new round of Gaza talks in Saudi Arabia March 20, 2024 Blinken begins new round of Gaza talks in Saudi Arabia March 20, 2024
  • Blinken to visit Israel amid tensions over plan to invade Rafah March 20, 2024 Blinken to visit Israel amid tensions over plan to invade Rafah March 20, 2024

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Assignment of IP Agreement (M&A)

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COMMENTS

  1. The Assignment of Commercial Contracts in Legal Practice

    Requirements for a Legal (Statutory) Assignment. All of Canada's common law provinces have enacted legislation allowing the transfer of contract rights. Notably, the legislation for Ontario is the Conveyancing and Law of Property Act. These statutory assignments are enforceable if the parties comply with the following procedures:

  2. Law Document English View

    R.S.O. 1990, c. A.33, s. 21 (1). Appointment of another inspector. (2) Where the appointment of an inspector is revoked or where an inspector dies, resigns from office or leaves Ontario, the creditors at any meeting may appoint another inspector to take the inspector's place. R.S.O. 1990, c.

  3. Contracts: assignment

    An outline of the ways in which contractual rights may be transferred to third parties by means of assignment, and the rule against assigning the burden, or obligations, of a contract. Thomson Reuters Practical Law Home. Canada Home Global Home NEW. Open navigation ... Get full access to this document with Practical Law. Try free and see for ...

  4. Commercial contracts in Canada

    Most commercial contracts in Canada are drafted to require the consent of at least one of the parties for assignment. Under the common law, unless provided for in the agreement, a party may only ...

  5. Assignment of Commercial Contracts

    Canada (Common Law) This Practice Note examines the law relating to the transferability of commercial contracts, including a party's legal ability to assign its rights and delegate its performance obligations under a contract that is silent on transferability, and the enforceability of contractual anti-assignment and anti-delegation clauses.

  6. Anti-Assignment Provisions and Assignments by 'Operation of Law': What

    Assignments by Operation of Law. In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale - situations not normally effected via legal statute or court-ordered proceeding in M&A transactions - will not in and of itself effect an assignment of that contract ...

  7. Anti-Assignment Provisions and Assignments by 'Operation of Law': What

    Assignments by Operation of Law. In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale - situations not ...

  8. Assignment, Delegation, and Third Party

    Business Legislation in Canada. Overview. The Constitution Act and the Duty to Consult Indigenous Peoples. ... Contracts are by law assignable and delegable. This means that the rights conveyed by the contract may be transferred to another party by assignment, unless an express restriction on assignment exists within the contract, or unless an ...

  9. Contracts and Commercial Law

    Under the Financial Administration Act (Canada), an assignment of a receivable owing by the federal government of Canada and certain federal corporations is invalid unless: (i) the assignment is absolute; and (ii) notice of the assignment has been given in a prescribed form to the appropriate government representative.

  10. Equitable assignment

    An equitable assignment may be made in one of two ways: The assignor can inform the assignee that he transfers a right or rights to him. The assignor can instruct the other party or parties to the agreement to discharge their obligation to the assignee instead of the assignor. Only the benefit of an agreement may be assigned.

  11. Canadian Legal Information Institute

    News. CanLII is a non-profit organization managed by the Federation of Law Societies of Canada. CanLII's goal is to make Canadian law accessible for free on the Internet. This website provides access to court judgments, tribunal decisions, statutes and regulations from all Canadian jurisdictions.

  12. Assignments by Operation of Law

    Assignments by Operation of Law. In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale - situations not normally effected via legal statute or court-ordered proceeding in M&A transactions - will not in and of itself effect an assignment of that contract ...

  13. 10 Things To Know About Assignment Sales in Real Estate

    With assignment sales, there are essentially 2 closings: the closing between the Assignor and the Assignee, and the closing between the Assignee and the Builder. With the first closing (the assignment closing) the original purchaser receives their deposit + any profit (or their deposit less any loss) from the Assignee.

  14. Canada: Novation Or Assignment, That Is The Question

    Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

  15. Assignment Involves Transfer of Rights to Collect Outstanding Debts

    Werden, 2011 ONCA 619 the Court of Appeal confirmed the existence of the right to transfer debts as an assignment in accordance to the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, which prescribes the various requirements when a creditor transfers ownership of rights involving monies owed, among other things. Specifically, the ...

  16. Assigning Contracts in Canadian Insolvency Proceedings

    The contracts contained clauses that expressly prohibited assignment of the contracts without the consent of the counterparties. Other clauses permitted either party to terminate the contract upon the insolvency of the other party. The plaintiffs, who were counterparties to the contracts, were not given notice of the debtor's CCAA proceedings ...

  17. Lending & Secured Finance Laws and Regulations Canada 2023-2024

    Most types of personal property and real property are available to secure lending obligations, subject to certain limitations by contract (e.g. contractual restrictions on assignment) or by law (e.g. government receivables, permits, licences and quotas). Provincial legislation generally governs the creation and enforcement of security.

  18. Assignment (law)

    Assignment [1] is a legal term used in the context of the laws of contract and of property. In both instances, assignment is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee. [2] An assignment may not transfer a duty, burden or detriment without the express agreement of the assignee.

  19. Assignments

    Once we have finished your assessment, you will usually follow one of three paths for meeting your assignments: Write and pass NCA exams, or. Complete assigned subjects at a Canadian law school, or. Complete a combination of 1 and 2 - that is, you may meet some requirements by writing NCA exams and the rest by completing related courses at a ...

  20. Federation of Law Societies of Canada

    Discover the options to meet your NCA assignments. Lawyer with a Canadian Civil Law Degree. If you received your legal education in either Quebec or the Canadian civil law program at the University of Ottawa - and you want to practise in a common law jurisdiction in Canada - you need to complete the NCA process. ...

  21. Assignment and Assumption Agreement

    Canada (Common Law) An assignment and assumption agreement used to transfer the vendor's contractual rights and obligations to the purchaser, which is delivered as an ancillary document in an asset purchase. This Standard Document has integrated Drafting Notes with important explanations and drafting and negotiating tips.

  22. #assignment #assignmentwriting #law #ukassignmenthelp # ...

    2 likes, 0 comments - thesis_assignment_help_ on June 1, 2023: "#assignment #assignmentwriting #law #ukassignmenthelp #assignmentstress #managementservices #micro #canada #marketingagency #finance #mar ...

  23. Teacher Secretly Sold His Students' Art on Mugs and Shirts, Lawsuit

    Parents of a dozen students at a school near Montreal accused an art teacher in a lawsuit of reproducing portraits from a class assignment and putting them on items that he offered for sale online.

  24. U.S. Justice Dept. Sues Apple, Claiming iPhone Monopoly in Antitrust

    The lawsuit caps years of regulatory scrutiny of Apple's wildly popular suite of devices and services, which have fueled its growth into a nearly $3 trillion public company.

  25. Legislative Review of the Cannabis Act : Final Report of ...

    Recommendation 20: We agree with the Standing Senate Committee on Indigenous Peoples that the Government of Canada, as it develops legislation in collaboration with the provinces and the territories, and First Nations governments, should establish legislative mechanisms for the enforcement of band bylaws and other laws related to cannabis by ...

  26. Canadian Schools Sue Meta, ByteDance and Snap Over Social Media

    Schools in some of Canada's largest cities have joined the legal fight against social media companies with lawsuits claiming Meta Platforms Inc.'s Facebook and others are harming children's ...

  27. Biden administration approves more weapons for Israel

    The new arms packages include more than 1,800 MK84 2,000-pound bombs and 500 MK82 500-pound bombs, according to Pentagon and State Department officials familiar with the matter.

  28. Notice of Assignment

    Notice of Assignment. by Practical Law Canada Commercial Transactions. A form letter that an assignee of contractual rights or delegatee of contractual duties uses to provide notice to the non-assigning or non-delegating party to the contract (also known as the obligor) of a transfer of contractual rights or duties.

  29. Assignment of IP Agreement (M&A)

    Assignment of IP Agreement (M&A) by Practical Law Canada Corporate & Securities. This is a standard short-form assignment of intellectual property (IP) agreement for use as an ancillary agreement to a principal asset purchase agreement. This IP assignment agreement can be attached as an exhibit to the principal asset purchase agreement and ...