New Brunswick to allow privately owned cannabis retail stores

Due to the division of legislative powers and responsibilities under the Canadian Constitution, the Canadian legal cannabis industry is governed and regulated by both federal and provincial/territorial governments. The distribution, sale and consumption of non-medical cannabis is driven by provincial and territorial governance and regulation, and as a result, the landscape of the retail cannabis industry varies quite significantly between jurisdictions.

In order to enforce the laws and regulations governing cannabis, each province/territory has established a specific regulatory body or authority. In addition to these regulatory bodies, many of the provinces/territories have also designated an exclusive authorized wholesaler. At the outset of legalization, many of these exclusive wholesalers were also the only legal retailer within their respective jurisdiction.

However, as the industry has evolved, some provinces, such as Ontario and Alberta, have shifted towards a privatized retail model. Following provincial Finance Minister Ernie Steeves' introduction of Bill 79 on Nov. 30, 2021, for a first reading in the Legislative Assembly, it appears that New Brunswick will follow in the footsteps of these provinces and begin its foray into the privatized legal cannabis market.

As matters currently stand, in New Brunswick, the regulatory body is the New Brunswick Liquor Corporation (the Corporation) and to date, Cannabis NB, a subsidiary of the Corporation, is the exclusive wholesaler and legal retailer of recreational cannabis in the province. However, Bill 79, titled An Act Respecting the Retail Sale of Cannabis, will bring in a wave of change in the province by modifying the existing legislative scheme which governs the sale and distribution of recreational cannabis in the province to allow the retail model to expand through privately owned retail outlets.

Bill 79 will usher in amendments to existing legislation, including the Cannabis Management Corporation Act, the Cannabis Control Act, the New Brunswick Liquor Corporation Act and their related regulations. However, the most notable changes will arise out of the introduction of the Cannabis Retailers Licensing Act (CRLA), which if enacted would enable prospective retailers to apply to the provincial minister of health for a licence to operate a cannabis retail outlet within the province.

Any and all licences issued pursuant to the CLRA will be non-assignable and subject to all terms and conditions both imposed by the minister of health and established by regulations.

In other provinces such as Ontario, the cannabis retail legislation restricts the transfer of assignment of licences but permits the sale of a licence through a process overseen by the regulator. It is expected that New Brunswick will follow a similar path, despite the existence of the non-assignability provision in the CRLA.

While much of the details will be contained in the yet-to-be drafted regulations, the CRLA itself does provide some insight about what the application and licensing system will look like for would-be retailers.

Eligibility

Section 3 of the CLRA sets out the minimum eligibility standards for applying and holding a Cannabis Retailer's Licence in the province. In order to do so, a person will need to satisfy the following:

1. Be at least 19 years of age;
2. Has not been convicted within the previous 5 years of an offence under designated legislation;
3. Is not or has never been a member of a criminal organization, and is not, or has never been involved in, or contributed to, the activities of that type of organization; and
4. Meets all other eligibility requirements prescribed by regulation. Application process

The application and approval process for a licence will, at a minimum, include background investigations into the criminal and financial history of the applicant and the proposed location for the retail location, though it is anticipated that the licensing process will be heavily dictated by regulations set by the minister of health.

It is important to note that the proposed CLRA distinguishes between approval of a licence and issuance of a licence and only those applicants who have received both approval and have also entered into a "service agreement," will be issued a licence to operate a retail outlet within the province. "Service agreement" is defined under the Cannabis Management Corporation Act and is proposed to be expanded by Bill 79 to include agreements between the Cannabis Management Corporation or a subsidiary of the Corporation and a third party.

Although the minister of health will have the flexibility to issue different classes of licences for varying lengths of term, the maximum initial term for a licence under the CLRA will not exceed five years.

Other provisions

In addition to delineating the core features of the soon-to-come privatized retail model in New Brunswick, the CRLA and the yet-to-be drafted regulations will also regulate a variety of other issues, such as:

• The cost of the application and annual fee;
• The grounds on which a licence may be restricted, suspended or revoked;
• Restrictions on who may enter a retail store (i.e. no one under the age of 19);
• Setting out a list of prohibited activities;
• Setting parameters around transport and delivery;
• Setting rules for who may be employed at the retail location;
• Setting rules around the display of products and advertising generally;
• Establishing required security measures; and
• Establishing record keeping requirements.

The passing of Bill 79 will open a number of new doors for industry stakeholders and will, without a doubt, expand the opportunities available in the New Brunswick recreational cannabis market. Nevertheless, there are still a number of practical gaps in the details of the proposed legislation including those related to: i) licensing eligibility requirements; ii) the licence application and approval process; iii) classes of licences; iv) the term, expiry and renewal of licences; v) licence fees; vi) the location of a retail outlet; vii) and the sale, marketing and operation of retail outlets. These practical details will heavily dictate what is to come in the New Brunswick cannabis space and will need to be fleshed out at a later date in the CLRA's regulations.

As noted above, Bill 79 was originally introduced in the Legislative Assembly on Nov. 30, 2021. On Dec. 1, 2021, it passed its second reading. Stay tuned for future updates as Bill 79 progresses through the legislative process and as the regulations are drafted.

This article was originally published in The Lawyer's Daily