Last year, and largely without fanfare in the midst of the beginning of (hopefully) economic recovery from a global pandemic, the Isle of Man enacted legislation which it hopes will provide “a flexible and detailed regulatory framework to allow commercial operators to grow, manufacture, distribute and export cannabis products under licence (see: https://www.isleofmangsc.com/)”. It is with a hopeful eye on the potential that the medicinal cannabis sector represents yet another niche economic opportunity for IoM PLC that its government has had the foresight to be at the vanguard of this burgeoning sector.

The new Regulations which the Island has put in place provide for the cultivation of medicinal cannabis for export purposes only. The changes do not allow any conduct in the Isle of Man that is not already permissible in the United Kingdom under their Misuse of Drugs Act 1971 (as amended). Broadly speaking there are therefore 8 licensed areas:

Cultivation Licence: A holder may grow high THC/CBD yield cannabis indoors with a view to selling biomass, plants and packaged plant parts. Female seeds only are permitted to be used. Pollen bearing plants must be destroyed as soon as they are detected.

Research licence: A licence holder may grow high THC/CBD yield cannabis indoors, aimed at creating new strains or seed stock. Utilisation of male and female seeds is permitted and seeds and seedlings can be sold. Biomass of the plant can be sampled for testing.

Transport & storage licence: A licence holder may transport and/or store controlled cannabinoids.

Manufacture licence: A licence holder may manufacture cannabis based products other than those created from biomass.

Extraction licence: A licence holder may extract cannabinoids from cannabis biomass, and remove unwanted elements from the extract.

Import licence: A licence holder may bring in to the Isle of Man material containing controlled cannabinoids.

Export licence: A licence holder may send material containing controlled cannabinoids from the Isle of Man. This licence covers any/all cannabis related products.

Analysis licence: A licence holder may receive samples containing controlled cannabinoids, for reason of testing and reporting upon the chemistry of the samples. ISO17025 accreditation, or equivalent is required for this licence to be granted. There is no separate licence for research and development. At present that is considered under analysis.

The sector will be regulated, and applications administered, by the Island’s Gambling Supervision Commissions (GSC), an independent statutory body initially set up in the 1960’s to regulate the physical gambling operations within the Island (including Casinos) but which was later also responsible for regulation of Isle of Man based businesses which operated in the online gambling market. At first blush, regulation of this sector by the GSC might seem odd, but it is well used to regulatory oversight and supervision of licensed entities in view of its longevity as regulator in the gambling market, whereas the Department of Health and Social Care, which previously had the power to make regulations in the area of medicines, does not have, and has never had, a supervisory or regulatory role.

The Application process is, as you might expect, rigorous and potentially complex, with the aim of preventing circulation of products containing harmful substances, ensuring only production/circulation of products for medicinal purposes and overarching all, safeguarding the Isle of Man’s obligations under various international treaties which govern this sector. Application requirements differ dependent upon the licence required but for example, in respect of licensing for growth of industrial hemp, may include provision of information such as:

Whether the applicant is a business or an individual

• Individual Details of the Responsible Person (the individual/ business representative seeking to cultivate industrial hemp (this will be the person with direct responsibility for any licensable activity and will be required to demonstrate some experience and understanding of agriculture and/or the cannabis industry))
• Business/Organisation Details if the Responsible Person is applying on behalf of a business.
• Proof of incorporation
• Details of anyone who may exercise control over a business this includes—
  • Beneficial owners
  • Shareholders with over 20% shareholding
  • Directors
  • Trustees
• For large or complex structures and business models the GSC will expect further information such as:
  • Group structure chart
  • Register of Shareholders
  • Details of how the business will be funded, i.e. start up and running costs
  • Proof as to the availability and source of the funds/wealth to be utilised for the business
• Other Individuals: Details of other key persons involved in the operation of the licence holder—
  • With responsibility for regulatory compliance
  • Tasked with site security
  • Nominated contact
• Other Licences held by the applicant or responsible person that may be relevant
• Activity. An outline of activity including—
  • Planting/harvesting schedule
  • Third parties involved in the operation including contractors e.g. transport, security, machinery operators etc.
  • Details of the end use of the material produced, route to market and customers for that product.
  • Information on how flowers, buds and leaves will be destroyed
  • Additional financial information including source of funds, source of wealth where funding is significant and 3 year financial projections
• Area for Cultivation, details of size and location and—
  • A site plan clearly showing the area(s) or premises to be used for cultivation highlighting storage facilities and any nearby features.
  • Proof of ownership of the site or permission to utilise the site, i.e. land deeds or leasing agreements
  • Details of site owners for all proposed sites
  • List of seeds to be used and suppliers
• Security and Record Keeping. Brief details relating to
  • How the site will be contained and protected from trespass, destruction or theft
  • How the applicant will ensure that no male (or intersex) plants are allowed to be cultivated and how they and any pollinated female plants will be removed and destroyed
  • Pest management plans
  • How waste materials will be safely destroyed
  • Incident management procedures to record theft, accidental damage or loss or other adverse incidents
  • Procedures for tracking deliveries, stock checks, site access, etc.
  • Record keeping in relation to incoming stock and outgoing produce

The GSC expects to adopt a proactive approach to supervision meaning regular inspections, requests for financial and stock returns and assessment of compliance with licence conditions. It will expect to be informed of material changes to any of the licence application requirements (such as those listed as examples for the industrial hemp licence above including changes in beneficial ownership, planting schedules, seed use, disposal processes, security provision etc).

The path to regulation is not easy. There are many obstacles but it’s clear the Island’s government is committed to develop a sector which has the capability to provide the jurisdiction with another niche area of income and growth in an effort to try and future proof economic stability. Potential licence holders will need extensive advice and assistance during the application process, and thereafter during operation to ensure compliance with the licence requirements. Use of local agents is of course preferable and we are on hand with individuals who bring unique skill sets to clients wishing to obtain advice on any aspect of this new sector.

Damian Molyneux is a director of M&P Legal. He can be contacted on dpm@mplegal.im
This article does not constitute legal advice, specific advice should be sought for individual circumstances.

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