Report - Regulations for the licensing production and export of Medicinal Cannabis in Jersey - 6 January 2022

Regulations for the licensing production and export of Medicinal Cannabis in Jersey

Economic and International Affairs Scrutiny Panel

6th January 2022 S.R.1/2022

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CONTENTS

1. Chair's Foreword ................................................................................................................. 5 Definition of Medicinal Cannabis .................................................................................................. 7
2. Executive Summary ............................................................................................................. 8 Key Findings ................................................................................................................................. 11 Recommendations........................................................................................................................ 15
3. Introduction ........................................................................................................................ 19 The Panel's Review ...................................................................................................................... 19 Methodology ................................................................................................................................. 19
4. Regulations ........................................................................................................................ 20 Current Regulations and The Memorandum of Understanding (MoU) .................................... 20
5. Licence Application ........................................................................................................... 25 Types of Licence........................................................................................................................... 25 The Application Process .............................................................................................................. 25 Licence Application and the Planning Process ......................................................................... 27 Licence Costs ............................................................................................................................... 28
6. Planning and the Environment ......................................................................................... 31 Overarching Scrutiny – EIA and EHI Scrutiny Panels ............................................................... 31 Department of the Environment .................................................................................................. 31

• Site notices, publishing your application and comments ............................................. 32

• Publishing your application .......................................................................................... 32 Exportation of Medicinal Cannabis ............................................................................................. 33 Environmental Impact Assessments .......................................................................................... 34

7. Security ............................................................................................................................... 41 States of Jersey Police................................................................................................................. 42 Customs and Immigration Service.............................................................................................. 43 Private Security............................................................................................................................. 43 Responsible or Qualified Person ................................................................................................ 44 Disposal ......................................................................................................................................... 45 Cultivation and Processing Sites ................................................................................................ 50
8. Overall Responsibility ....................................................................................................... 52 Ministerial Responsibility ............................................................................................................ 52 Internal Groups Involved in the Industry.................................................................................... 55 Jersey Cannabis Agency ............................................................................................................. 55 Expansion of the JCA Remit........................................................................................................ 56 Jersey Cannabis Advisory Group ............................................................................................... 57 Cannabis Co-ordination Group ................................................................................................... 57 Cannabis Trade Body ................................................................................................................... 58

9. Economic Impact ............................................................................................................... 60 Potential Economic Impact to Jersey's Economy ..................................................................... 60 Space Requirements .................................................................................................................... 60 Employment .................................................................................................................................. 60 Wages and Salaries ...................................................................................................................... 62 Taxation ......................................................................................................................................... 63 Value Added .................................................................................................................................. 63 Economic Framework .................................................................................................................. 63 Economic Impact Assessments of Applicants .......................................................................... 64 Investment ..................................................................................................................................... 67
10. Tax Implications ................................................................................................................. 68 Update to Finance (Jersey) Law .................................................................................................. 68 Proceeds of Crime Amendment .................................................................................................. 69 Tax Intake to the Island ................................................................................................................ 70 Employment Taxation .................................................................................................................. 72 Corporate Taxation ....................................................................................................................... 73 Indirect Taxation ........................................................................................................................... 73 Taxation on Profits ....................................................................................................................... 74
11. Reputational Risk to Jersey .............................................................................................. 75 Cannabis: Medicinal vs Recreational ......................................................................................... 75
12. Intellectual Property .......................................................................................................... 77 Registration and Patents ............................................................................................................. 77 Transition Period for Existing Licence Holders......................................................................... 79
13. Conclusion ......................................................................................................................... 81 Appendix 1 .................................................................................................................................... 82 Panel Membership ........................................................................................................................ 82 Terms of Reference ...................................................................................................................... 82 Appendix 2 .................................................................................................................................... 83 Comparisons with other Jurisdictions ....................................................................................... 83 Jersey vs Malta ............................................................................................................................. 84 Jersey vs Portugal ........................................................................................................................ 89 Jersey vs Guernsey ...................................................................................................................... 94

Terms of licensing for the cultivation, import and export of medicinal cannabis in Guernsey ........................................................................................................................................................ 94

Appendix 3 .................................................................................................................................... 98 Types of Licence and Criteria...................................................................................................... 98 Appendix 4 .................................................................................................................................. 100 What is Medicinal Cannabis? .................................................................................................... 100 Prescriptions of Cannabis Based Medicinal Products (CBMP) issued in Jersey ................ 100 Appendix 5 .................................................................................................................................. 102 Panel Adviser's Report .............................................................................................................. 102

1. Chair's Foreword

In April 2021, the Panel announced it was undertaking a review of the Regulations for the licensing, production and export of medicinal cannabis in Jersey. For the avoidance of doubt, the review does not cover the prescription or use of medical cannabis within Jersey which is beyond the Panel's remit.

As stated in the Introduction to this report, the Panel had major concerns as to what appeared to be the lack of regulations in place for this industry, particularly since two medicinal cannabis licences had already been granted. In general terms, the review carried out by the Panel (in conjunction with expert advisers) confirms that those concerns were justified as illustrated by the number of key findings and recommendations.

Jersey does not have its own set of regulations in place for the medicinal cannabis industry and is reliant on a Memorandum of Understanding (MoU) with the UK Home Office Drugs and Firearms Licencing Unit (DFLU). The establishment of the Jersey Cannabis Agency (JCA) was necessary in order for Jersey to enter into this MoU and allows the Island (through the JCA) to issue licences to cultivate, possess and supply cannabis-based products for medicinal use as a regulatory authority in its own right. The JCA is currently made up solely of the Minister for Health and Social Services and is administered by the Chief Pharmacist. There is no additional Ministerial input. Leading on from the above, the MoU is not itself a regulatory framework and there are no standalone regulations as such for the Panel to scrutinise. During the course of its review, the Panel has therefore sought to identify potential areas of concern under a number of broad headings and these are dealt with fully in the following pages of this report. However, one matter to which I here draw attention is the rationale behind our various recommendations being directed to the Council of Ministers (CoM) as a whole, as opposed to individual Ministers.

Prior to undertaking this review, the Panel had understood that the Minister for Economic Development, Tourism, Sport and Culture ("EDTSC") had overall responsibility for the medicinal cannabis industry; however, as the review progressed, it became apparent that no single Minister had responsibility for the industry in its entirety. It is the Minister for Health and Social Services (in his capacity as sole member of the JCA) who has responsibility for the issue of licences with the Minister for EDTSC being responsible for the overall economic development and rural economy; further, whilst the Minister for the Environment currently has little or no input in relation to the licence application process, or indeed some basic matters relating to the planning process (which are discussed in more detail within this report), we have recommended that officers of the Planning and Environment Department be responsible for the assessment and approval of any Environmental Impact Assessment submitted with the licence application. In short, the Panel consider that a more holistic approach be taken as to the future progress of this industry and, with further matters falling within the responsibility of other Ministers, so it was deemed appropriate that our recommendations be directed to CoM as a whole.

This general theme of the need for an inter-departmental approach to this new industry runs through this report and is supported by recommendations as to cross-departmental requirements and synergies being developed such as adequate representation on the Jersey Cannabis Agency (and other internal groups involved in the industry) of relevant Ministries and others.

Of the other important aspects covered in this report, I here highlight the economic impact this industry will have on the Island and mention the absence of detailed fiscal reporting to confirm the figures being proposed by Government. The Panel has previously undertaken work in the form of a comments paper on the recently approved amendment to the Public Finance Law which provides that all medicinal cannabis companies will be taxed at 20% on profits. It should be noted however that, based on the Panel's evidence gathering, the tax intake to the island in the first few years of a company's operation is likely to be minimal.

The ensuing report covers a wide range of matters both as to the requirements on the initial licence application and ongoing matters such as appropriate certification on export. As advised in the conclusion to its report, the Panel is excited at the potential for a new thriving sector to the Jersey economy. It is however concerned to ensure the cultivation of medicinal cannabis in Jersey operates within a strong regulatory framework and this report sets out to build on what is currently in place and to ensure that the international reputation of Jersey is not tarnished. It is to be hoped that CoM will consider, and accept, the Panel's various recommendations as a valuable contribution to those ends and with a view to seeing this new industry prosper in the future.

Finally, I acknowledge that this review has taken considerably longer to complete than was first anticipated, this being due to a number of factors including additional information coming to light and the need to pursue other avenues. However, I now take the opportunity of thanking the various Ministers, their officers and the Chief Pharmacist for their co-operation throughout the period. Similarly, I also thank our expert advisers, Grant Thornton, Malta for all their help in producing their own report which is attached.

Finally, I express my gratitude both to my Panel colleagues for their support throughout the period and, not least, to our Scrutiny officer for all her work including that of compiling this comprehensive report.

Dated this 6th day of January 2022

Deputy David Johnson Chair

Definition of Medicinal Cannabis

Throughout this report, the Panel refers to the term medicinal cannabis'. It should be noted that the term "medicinal cannabis" means a number of things to different people and we set out below the phraseology provided by the Chief Pharmacist which we hope will give some clarity:

Medicinal cannabis would be the finished medicinal products that can be prescribed and given to patients. Everything leading up to that are ingredient precursors, but it is that final product. I think as long as we clear that when we say medicinal cannabis we are talking about what we can give to patients then I think we will be fine.

I think the general terminology that is used, because cannabis-based medicines can be the flower, they can be oils, they can be capsules, they can be a range of different formulations, in general terms the use of the cannabis-based product for medicinal use, or C.B.P.M. (cannabis- based product for medicinal use) for short, so that would be a good phrase to use when we are talking about medicinal products.[1]

As the majority of its report refers to the finished product, the Panel has continued to use the phrase medicinal cannabis' as meaning the cannabis-based product for medicinal use throughout except only where the term cannabis' is deemed appropriate.

2. Executive Summary

In April 2021, following correspondence received by the Panel and other States Members from concerned members of the public regarding the medicinal cannabis industry, the Panel decided to undertake a review as to the impact of this industry on Jersey. The Panel agreed it would look at the regulatory aspect of medicinal cannabis licensing together with the economic impact and possible reputational risk to the Island. The Panel was mindful that the review could touch on environmental and planning issues and, with this in mind, agreed to make reference to these issues and liaise where necessary with the Environment Housing and Infrastructure Scrutiny Panel.

The Regulations

Jersey does not have its own set of regulations in place for the medicinal cannabis industry and is reliant on a Memorandum of Understanding (MoU) with the UK Home Office Drugs and Firearms Licencing Unit (DFLU). The MoU is between the UK Home Office and the Minister for Health and Social Services (Minister for HSS) acting on behalf of the Government of Jersey. The MoU makes reference to the Jersey Cannabis Agency (JCA) which is the body authorised by the UK Home Office to grant licences for medicinal cannabis under Article 10 of the Misuse of Drugs (General Provisions) (Jersey) Order 2009. The JCA is the Minister for HSS currently designated as the authorised sole member and is administered by the Chief pharmacist. Whilst the MoU authorises Jersey to grant licences, the Panel has recommended in this report that Jersey establishes its own set of regulations for this fledgling industry, to bring the Island into alignment with other jurisdictions.

Licence Application and Process

At the time of drafting this report, two licences have been granted for the cultivation, processing and export of medicinal cannabis in Jersey. The Panel has raised concerns around the level of the medicinal cannabis licence fee which is low in comparison with some other jurisdictions, and in addition, the Panel believes the licence application process in general needs to be reviewed and considerably strengthened.

Security

The Panel and its advisers have recommended that clear plans are submitted at the licence application stage to demonstrate the exact security measures that will be put in place including security equipment, personnel and provision of relevant training to staff working in this specialised industry. The Panel has also recommended that the disposal of the medicinal cannabis crop, once harvested, should be carried out by personnel who are experienced in the disposal of hazardous waste.

Planning and Environment

The Panel has highlighted two incidents in Jersey that have been brought to its attention where unauthorised planning works have taken place on medicinal cannabis cultivation sites with the subsequent plans submitted retrospectively being described as piecemeal'. The Panel is strongly of the view that the requirements of the Planning process are aligned with the licence application process to ensure consistency, transparency and fairness.

EU/GMP Certification

Currently medicinal cannabis can be exported with or without a European Union Good Manufacturing Practice (EU/GMP) certification. EU/GMP certification is the highest recognition available to pharmaceutical companies and involves rigorous testing to ensure the product and the company is compliant with strict EU regulations. Obtaining EU/GMP accreditation shows that the company has been scrutinised and approved by the EU/GMP licensing authority, that the company meets the required standards and that the product is of a high quality. There are currently no requirements in Jersey for (medicinal cannabis) licence holders or applicants to obtain EU/GMP accreditation and the Panel is concerned this could result in lower grade medicinal cannabis being exported from the Island, resulting in damage to the Island's highly regarded international reputation. The Panel has made the recommendation that all medicinal cannabis licence applicants should be required to apply for EU/GMP accreditation prior to receiving a medicinal cannabis licence, with key milestones in place to ensure the process is being followed and the licence holder is taking the relevant steps to achieve this.

Ministerial Responsibility

The Panel found Ministerial responsibility and accountability to be lacking throughout the course of its review. Prior to undertaking its review, the Panel believed that responsibility for the fledgling Jersey medicinal cannabis industry lay with the Minister for Economic Development, Tourism, Sport and Culture (EDTSC), however, it soon became apparent this was not the case. It is in fact the Minister for Health and Social Services (HSS) who holds responsibility for the issuance of licences, the Minister for EDTSC being responsible for agricultural and economic related matters. It is unclear what, if any, specific responsibility the Minister for the Environment holds in the medicinal cannabis industry and one fundamental element of this report is the extent of his involvement, or otherwise, with the licence application process.

The Panel found a lack of collaborative working between Government Departments, and this is strongly emphasised within this report with recommendations for improvement. This lack of Ministerial accountability is the reason the Panel has made all of its recommendations to the Council of Ministers, as it believes stronger and more coherent cross Departmental working needs to be developed with the Council of Ministers having more input with clearly defined lines of Ministerial accountability for this industry.

Economic Impact

The economic impact of the medicinal cannabis industry on the Island was examined by the Panel's advisers, and they concluded that whilst there was an opportunity for the industry to be financially successful, it was still very much in its infancy and the forecasted revenues could be considered speculative.

Tax Implications

It has been proposed by the Government that tax of 20% be implemented on the profits of the medicinal cannabis industry with the Panel being informed by the Group Director of the Economy that the tax intake to the Island would likely commence in 2024, with an estimated £4million in tax receipts. The Panel and its advisers consider this figure to be extremely speculative considering the industry is relatively new with any forecasts at this stage would be hard to predict. The Panel was informed by its advisers that the industry requires companies to invest heavily in the early years of the business and, with the ability to set off this initial expenditure against gross income, the profitable tax intake may be minimal for the first few years. In addition, employment, corporate and indirect taxation were looked at by the Panel's advisers with their conclusion that very little additional new taxation would arise in the short to medium term.

Reputational Risk

Jersey rightly prides itself on its respected international reputation in all spheres. The importance of the potential damage to such reputation, should the medicinal cannabis industry not be sufficiently regulated, should not be underestimated. The Panel has already identified the importance of medicinal licence holders obtaining EU/GMP accreditation and strongly recommends that no cannabis be exported without this certification. Cannabis has long been perceived in some quarters as being an illicit drug, and the acceptability of medicinal cannabis use is a relatively new concept. Public engagement and education in relation to the difference between medicinal cannabis and recreational cannabis therefore needs to be given further consideration by the Council of Ministers.

Intellectual Property

The Panel's advisers were keen to point out the benefits of protecting Intellectual Property (IP) rights within this industry and consequently the Panel has recommended this area be explored in more detail. One such area was around research and development, with the advisers stating that Jersey could develop cultivation activities and be encouraged to seek research partners such as hospitals, universities and  clinical  research organisations.  They  also  informed  the  Panel  that  medicinal cannabis for veterinary medicine is a new niche area and that, whilst in the last five years the market for medical cannabis for human consumption has seen huge strides forward, the application of cannabis-based products to animals is practically unexplored. The Panel view this as a largely undeveloped area and would be keen to see what further opportunities exist and how this could benefit the medicinal cannabis IP industry in Jersey.

Conclusion

The Panel is excited at the potential for a new thriving sector to the Jersey economy. The Panel is however concerned to ensure the cultivation of medicinal cannabis in Jersey operates within a strong regulatory framework, that promotes the production of cannabis and cannabis products for medicinal purposes only. This report sets out to build on what is already in place and to ensure that the reputation of Jersey is not tarnished. Our Island must continue to be viewed as a stable jurisdiction with robust levels of regulations in place that encourage, rather than stifle, investment. The Panel also considers that, if Jersey is to be the home of a successful medical cannabis industry, it is important that Islanders are given the opportunity to comment on developments within the industry, with full transparency and collaborative working with Government, which is not the case at present.

Key Findings

Key Finding 1

The Jersey Cannabis Agency (JCA) has responsibility for the issuance of licences and is the named body in the Memorandum of Understanding (MoU) with the UK Home Office. The JCA is currently made up solely of the Minister for Health and Social Services and is administered by the Chief Pharmacist.

Key Finding 2

The  Bailiwick  of  Guernsey  Cannabis  Agency  (BGCA)  is  made  up  of  representatives  of Environmental Health and Pollution Regulation, the Chief Pharmacist and business support from the Committee for Economic Development, with close support and consultation with Bailiwick Law Enforcement officers. This is in contrast to the Jersey Cannabis Agency with the Minister for Health and Social Services as the sole designated member.

Key Finding 3

The Memorandum of Understanding (MoU) is between the UK Home Office Drugs and Firearms Licencing Unit (DFLU) and the Minister for Health and Social Services as representative of the Government of Jersey. In the absence of standalone regulations, the MoU allows the Minister to issue licences in Jersey for the cultivation, processing and export of medicinal cannabis. The MoU was prepared by the UK Home Office with very little or no input from the Government of Jersey.

Key Finding 4

Jersey does not have its own specific regulations to control the Island's medicinal cannabis industry. Key Finding 5

There  is  no  requirement  for  the  Chief  Pharmacist  to  inform  the  Jersey  Financial  Services Commission (JFSC) of any change proposed change of ownership of the licencee whether approved or non approved.

Key Finding 6

The Jersey licence application fee for the cultivation, processing and export of medicinal cannabis is low in comparison with some EU jurisdictions and may not be economically viable in the future.

Key Finding 7

The Minister for the Infrastructure, Housing and Environment informed the Panel that he had little involvement in the development of the medicinal cannabis industry, despite the Department being responsible for Island planning and environmental policy issues.

The current application procedure for a medicinal cannabis licence requires the submission of an "Economic Impact Assessment" (EIA). However, unlike the form of EIA submitted with a planning application, the EIA accompanying an application for a medical cannabis licence is not available to the public and there is no procedure for the public to then make representations relating to a licence application.

Key Finding 9

The Department for Infrastructure, Housing and Environment, with responsibility for Environmental Impact Assessments (EIA's) under the planning application process, have not had sight of either of the EIA's submitted with the licence applications that have since been granted by the Minister for Health and Social Services.

Key Finding 10

Although the security framework is included in the initial licence application, there is no requirement for this to be approved by Planning prior to the licence being granted. Security requirements for each medicinal cannabis cultivation site must be stated at medicinal cannabis licence application stage however, the security does not need to be actually in place before the licence is issued.

Key Finding 11

The States of Jersey Police have informed the Panel they will not be directly involved in the policing of the medicinal cannabis industry in Jersey and their sole responsibility will be to respond to any crime occurring which requires a police presence or investigation.

Key Finding 12

The involvement of private security firms to undertake the monitoring and implementation of security for medicinal cannabis sites would eliminate pressure on the States of Jersey Police and other public services.

Key Finding 13

Every licence application must designate a specific Controlled Person as the person responsible for the regulatory affairs of the medicinal cannabis business. Apart from passing due diligence and enhanced DBS checks, there are no specific qualifications necessary for the role.

Key Finding 14

In relation to the disposal of the harvested cannabis crop, it is not clear what procedures the Responsible Person would follow. It is also unclear what experience the Responsible Person will need to deal with its destruction within the methods set out and endorsed by the UK Home Office. European Union Good Manufacturing Practice (EU/GMP) certification is the highest recognition available by companies in the pharmaceutical sector. It involves rigorous testing of the product to ensure that, not only the product, but the company, is compliant with strict EU regulations. Obtaining EU/GMP accreditation shows the company has been scrutinised and approved by the EU/GMP licensing authority, it meets the required standards and the product is of a high quality (products that comply to GMP standards in relation to the production of Active Pharmaceutical Ingredient (APIs) or Cannabis Based Products for Medicinal Use (CBPMs). There is currently no requirement for those granted licences for cultivation, production and export of medicinal cannabis in Jersey to obtain EU/GMP accreditation.

Key Finding 16

As previously mentioned, the Minister for HSS is authorised to issue licences under the terms of the MoU however, these are purely for cultivation production, possession and supply. In order to process and manufacture and export the finished processed product, the licence applicant would need to have EU/GMP accreditation which requires separate assessment.

Key Finding 17

Without the licence holder obtaining EU/GMP accreditation, the risk is increased that lower grade crops could be exported from the Island resulting in damage to the Island's reputation.

Key Finding 18

There is little evidence to show that checks and balances are in place to ensure the processing of the medicinal cannabis crop is done on an appropriate processing site. There is also little evidence in  place  to  ensure  secure  monitoring  so  that  the  existing  cultivation  sites  do  not  become industrialised'. Without these checks and balances there is a risk that existing cultivation sites could become sites for processing, which requires a more commercial approach and a relevant planning application.

Key Finding 19

The medicinal cannabis industry cuts across a number of political responsibilities, and the Council of Ministers has not appropriately established an holistic Government approach to the matter which has in turn blurred lines of accountability. It is therefore difficult to see where the Ministerial responsibility lies.

Key Finding 20

The Jersey Cannabis Agency does not have clearly defined Terms of Reference and is reliant solely on the Memorandum of Understanding (MoU) currently in place with the Government of Jersey (with the Minister for Health and Social Services as the sole representative of the GoJ) and the UK Home Office.

The Panel appreciates the need for a Cannabis co-ordination group of civil servants but is concerned that, with no Minister being involved in this group, it might lead to key decisions being taken without considered input from Ministers.

Key Finding 22

The medicinal cannabis industry in Jersey has the potential to employ between 40-50 people in the immediate term, 160–180 in the medium term and 330-360 in the long term.

Key Finding 23

It has been agreed that a tax rate of 20% will be applied to this industry on all profits.

Key Finding 24

Now that Jersey has opted for a 20% rate on companies' taxable profits, tax revenues from such activity may be minimal for several years from the date of licence registration.

Key Finding 25

The medicinal cannabis industry's contribution to the Jersey economy is not expected to exceed wage estimates in the early years.

Key Finding 26

The business model of medicinal cannabis companies generally requires that they invest heavily in the early years of the business. Profits therefore from the industry may be minimal for several years from the date of licence registration.

Key Finding 27

Based on the information provided, the Panel's advisers have concluded that to date, very little additional "new" taxation would arise in the short to medium term. This includes personal tax, corporate tax and indirect taxation such as GST.

Key Finding 28

The Minister for Treasury and Resources has informed the Panel that it is not yet possible to forecast how much tax will be raised from the taxation of the cannabis industry in Jersey due to the industry being in its very early stages and forecasts would be speculative.

Recommendations

Recommendation 1

The Council of Ministers should ensure that there is adequate representation on the JCA of the range of relevant Ministries, including the Minister for Economic Development and the Minister for the Infrastructure, Housing and Environment so that that matters related to all sectors impacted by the medicinal cannabis industry are fully considered. This should be carried out with immediate effect.

Recommendation 2

The Council of Ministers should implement Jersey's own detailed and specific regulations for the medicinal cannabis industry. This work should be carried out immediately with a clear timeline set in place with the Legislative Drafting Office.

Recommendation 3

The Council of Ministers should ensure that the medicinal licence application process includes a full business case setting out the reasoning behind the project, the project and operational costs and timescales and clearly define all benefits both financial and non-financial to Jersey. A business case template should be developed with immediate effect.

Recommendation 4

The Council of Ministers should ensure the Chief Pharmacist informs the Jersey Financial Services Commission (JFSC) of any proposed change of ownership of the licensee whether approved or non approved. This would allow the JFSC to check the change against its existing register. Any changes of ownership should be accompanied by a copy of the approval from the Chief Pharmacist. This should be implemented with immediate effect.

Recommendation 5

The Council of Ministers should ensure that clearly defined building and development plans are put in place at licence application stage for the use of utilities such as water and electricity with standalone structures (such as substations, pump houses etc) if required. This should be overseen by the Planning Department and put in place with immediate effect.

Recommendation 6

The Council of Ministers should ensure the licence fee for the cultivation, production and export of medicinal cannabis is reviewed immediately and benchmarked against the minimum required resource to regulate this industry in Jersey. This should be carried out with immediate effect.

Recommendation 7

The Council of Ministers should ensure that all Environmental Impact Assessments submitted as part of a medicinal cannabis licence application are made public and, a process introduced that

allows both the public and key stakeholders to comment on any such EIA prior to the approval of any licence with immediate effect.

Recommendation 8

The Council of Ministers should ensure that officers of the Planning and Environment Department are solely responsible for the assessment and approval of any EIA submitted with a medicinal cannabis licence application prior to the Jersey Cannabis Agency (JCA) determining the application with immediate effect.

Recommendation 9

The Council of Ministers should ensure that prior to a medicinal cannabis licence being issued, a detailed plan for site security should be set out within any licence application. No cultivation of cannabis should begin on site until all the approved security measures are implemented and signed off by the JCA and penalties put in place to ensure compliance.

Recommendation 10

The Council of Ministers should ensure that a specialised training programme is delivered to Customs and Immigration officers in relation to handling the import and export of medicinal cannabis products. A training plan should be developed within 6 months of the presentation date of this report.

Recommendation 11

The Council of Ministers should ensure the Responsible Person who is nominated by the licence applicant at application stage should hold the relevant qualifications to undertake this role. This should include relevant experience in both the science and biological industry and in the disposal of hazardous waste materials. This should be made part of the licence application process and carried out with immediate effect.

Recommendation 12

To protect the quality and reputation of produce grown in Jersey, the Council of Ministers should ensure there is a requirement to apply for EU/GMP accreditation prior to receiving a medicinal cannabis licence to cultivate, process or export cannabis products. This should be monitored by a designated body (JCA) with key milestones in place to ensure the process is being followed and the licence holder is taking the relevant steps to achieve this. This should form part of the licence application process criteria and should be carried out with immediate effect.

Recommendation 13

The Minister for Planning and Environment must ensure that any sites to be used for the cultivation of medicinal cannabis remain solely for that use. Should a licence holder require a site for processing of the medicinal cannabis crop once harvested, a separate planning application for this industrial activity should be submitted for these purposes in a suitably zoned area. This should be carried out with immediate effect.

The Council of Ministers must recognise cross departmental requirements and ensure synergies are developed especially between the Minister for Health and Social Services, the Minister for Economic Development, Tourism, Sport and Culture, and the Minister for the Environment. This should be carried out with immediate effect.

Recommendation 15

The Council of Ministers should ensure the Jersey Cannabis Agency has representatives of other Departments as members. At a minimum, this should include Department of Infrastructure, Housing and Environment, Economic Development, and the Chief Pharmacist and with further support from Law enforcement officers. This group should also be responsible for undertaking due diligence on new licence applications. This should be carried out with immediate effect.

Recommendation 16

The Council of Ministers should ensure the remit of the Jersey Cannabis Agency is expanded to include both the monitoring function of the medicinal cannabis industry, and compliance with security, quality of production, clear moral conduct of people working in the industry and issuance of trade licences. The monitoring function would also include ensuring Customs and Excise and the States of Jersey Police are well informed about the process of the medicinal cannabis industry and are trained to be attentive to illicit drug importation and possession. This should be carried out with immediate effect.

Recommendation 17

The Council of Ministers should ensure the Cannabis Co-ordination Group is more transparent and publishes its minutes on the Government of Jersey website. Furthermore, it should carry out a wider communications strategy to help the public gain a better understanding of the potential benefits of the medicinal cannabis industry in Jersey. The Council of Ministers should also carry out a communication strategy with members of the public which may help the public gain a clearer understanding of what the future holds for the medicinal cannabis industry in Jersey.

This should be carried out within 6 months of presentation of this report. Recommendation 18

The Council of Ministers should ensure a clearly defined structure chart is in place showing the layout and responsibility for each of the supporting groups for the medicinal cannabis industry. This should show defined reporting lines from each of these groups to the relevant Minister with Terms of Reference setting out clear objectives. This should be carried out with immediate effect.

Recommendation 19

The Council of Ministers should consider alternative tax bases for the medicinal cannabis industry in Jersey as the indicative taxable profits for the industry may be minimal for several years from the date of licence registration. This should be carried out with immediate effect.

The Council of Ministers should undertake a reputational risk assessment to determine the impact of the medicinal cannabis industry on Jersey's existing core industries. This should include the mitigation  of  such  risks  and  cover  financial,  operational,  competitive,  security,  privacy  and compliance. This should be carried out with immediate effect.

Recommendation 21

To improve social awareness and reduce risk of misuse, a public engagement process should be carried out to educate members of the public on the differences of recreational and medicinal cannabis and also highlight the potential benefits of medicinal cannabis. A plan of communication should be compiled with immediate effect.

Recommendation 22

The Council of Ministers should consider a range of possible incentives for on-Island medicinal cannabis growers, to apply for patent and Intellectual Property (IP) protection. This should include research and development and intellectual property, which hold potential benefits. This should be discussed with external stakeholders within 6 months of presentation of this report.

Recommendation 23

The Council of Ministers should consider encouraging the promotion of medicinal cannabis for the use in veterinary medicine which is a new niche area. This should be carried out with immediate effect.

Recommendation 24

The Council of Ministers should ensure all existing medicinal cannabis licence holders implement any changes to their current medicinal cannabis business following any recommendations agreed by the Council of Ministers as a result of this report. These should be carried out within the timeframe stipulated, currently one year from the implementation of the recommendation.

3. Introduction

The Panel's Review

In April 2021, the Panel announced it was undertaking a review of the Regulations for the licensing, production and export of Medicinal Cannabis in Jersey. This followed correspondence received by the Panel and other States Members from concerned members of the public regarding the medicinal cannabis industry and its impact on Jersey. The medicinal cannabis industry is relatively new and the Panel believed it was an area that should be looked at more closely. The Panel understood the global medicinal cannabis industry to be vast and approached the review with a cautious outlook agreeing to focus on the regulations of licences regarding the cultivation, processing, export and import of medicinal cannabis together with the economic impact and possible reputational risk to the Island. The Panel had major concerns around what seemed to be the lack of regulations in place for this industry, particularly since two medicinal cannabis licences had already been granted. Whilst undertaking its review, the Panel scrutinised evidence relating to many different areas and has highlighted what it considers to be the key issues within this report. Each of these is commented on separately within the Executive Summary.

Methodology

The Panel wrote to key stakeholders which included current licence holders, the Jersey Financial Services Commission (JFSC), States of Jersey Police (SoJP), Group 4 Security (G4S) and other private security firms. The Panel did not undertake a general call for evidence from members of the public as its attention was on the regulatory aspects of the industry.

Following a full tender process, the Panel engaged the services of Grant Thornton, Malta (GTM) to assist it in undertaking its review. Following an interview with GTM, the Panel believed they held the relevant experience in undertaking all aspects of its review; in this connection, it is to be noted that, in 2018, Malta approved  Chapter 578, the Production of Cannabis for Medicinal and Researches Purposes Act, an Act which the Panel believed would be key to understanding the industry regulations and would be paramount to a full and thorough scrutiny process.

Whilst accepting that the Government of Malta might itself be involved in promoting the medicinal cannabis industry in their own jurisdiction, the Panel did not consider this to be relevant to the appointment of an individual firm operating out of Malta; GTM is part of a global professional organisation (also with offices in Jersey) and, having entered into the standard confidentiality clauses within the terms of their appointment, the Panel is confident there is no cause for concern that information received by GTM might possibly come into the hands of competitors.

GTM also used the experience of Grant Thornton, Jersey (GTJ) to undertake the Jersey aspects of the review which included The Taxation Aspect, Economic Impact and the Reputational Risk Aspect of their report.

The Panel held Public Hearings with the Minister for Economic Development, Tourism, Sport and Culture (EDTSC), the Minister for Health and Social Services (HSS) and the Minister for the Environment (MENV). The Panel's advisers provided input to the areas of questioning for each of these hearings which were recorded, transcribed and can be viewed on the review page of the Scrutiny website. The Panel also wrote to the relevant Ministers including the Minister for Treasury and Resources on separate occasions to seek clarification on various issues, the details of which are discussed throughout this report.

4. Regulations

Current Regulations and The Memorandum of Understanding (MoU)

Jersey does not have its own set of regulations and licences are currently granted under the MoU between the UK Home Office Drugs and Firearms Licensing Unit (DFLU) and the Minister for Health and Social Services. The UN Single Convention of Narcotic Drugs 1961 (Convention') requires any party to the Convention that permits the cultivation of the cannabis plant for the production of cannabis or cannabis resin to apply a system of controls. The UK is the state party to the Convention on Jersey's behalf.

The MoU makes reference to the Jersey Cannabis Agency (JCA) which is the body authorised by the UK Home Office to grant licences for medicinal cannabis*. The JCA is administered by the Chief Pharmacist with the Minister for HSS currently designated as the authorised member. The Minister for HSS is the only member of the JCA and, as such, is solely responsible for the issue of medicinal cannabis licences. The JCA does not have defined Terms of Reference and operates under the terms of the MoU which provide the framework for the JCA to exist but with no form of regulations.

It should be noted that licences are not granted for the cultivation of "medicinal cannabis". They are granted for the cultivation of "cannabis" which can then be used subsequently as the botanical raw material in the production of an Active Pharmaceutical Ingredient (API) or finished Cannabis Based Medical Product (CBPM).

Licences can be granted under Article 10 of the Misuse of Drugs (General Provisions) (Jersey) Order 2009 for the cultivation of cannabis and under Article 3 of the same order for the production, possession and supply of a controlled substance. Licences under Article 3 are not specific to cannabis but cover cannabis as a controlled substance.

The MoU recognises that the issue of licences under the provisions of the Misuse of Drugs (Jersey) Law 1978 or the Medicines (Jersey Law) 1995 remains the responsibility of the JCA (currently the Health Minister as sole representative).[2] Within its report, the Panel's advisers have stated that The JCA Advisory Group, even if totally non-executive, is a step in the right direction. Government should appoint a focal point made up of representations of various Ministries in order to dialogue with all operators. The JCA could also act as the focal point for the international promotion of the sector.'[3]

The MoU is subject to be reviewed every three years and is to be updated as necessary.

In July 2021, the Government of Guernsey signed a Memorandum of Understanding (MoU) with the UK Home Office. The Guernsey-UK Home Office MoU facilitates an agreement between Guernsey's Committee for Health & Social Care (GCHSC) and the UK Home Office, in relation to granting authorisations to cultivate medicinal cannabis in Guernsey.

The Guernsey-UK Home Office MoU, in a similar manner to the Jersey-UK Home Office MoU, enables Guernsey to fulfil its obligations to ensure compliance with the UN Single Convention of Narcotic Drugs 1961 and makes reference to the Bailiwick of Guernsey Cannabis Agency' (BGCA), similar to that of the Jersey Cannabis Agency (JCA). The constitution of the BCGA differs considerably from that of the JCA which is comprised solely of the Minister for HSS. The BGCA as constituted by the GCHSC, comprises the Director of Environmental Health and Pollution Regulation (Dr Tobin Cook), the Chief Pharmacist (Beverley Hall ) and business support from the Committee for Economic Development (Keith Wilen), with close support and consultation with Bailiwick Law Enforcement officers.

Whilst the Panel is pleased to note its advisers support the JCA and see it as a step in the right direction, it is concerned that with the Minister for HSS as the sole designate on the JCA, the scope of the group and its direction could be limited. The Panel believes the JCA would benefit from additional members drawn from across the GoJ in both executive and non executive roles. In addition, the Panel advisers have recommended that a representative of the Department for Infrastructure, Housing and Environment (IHE) should form part of the JCA – something the Panel believe would benefit the JCA greatly.

The Panel was concerned that, in the absence of standalone regulations and in line with what was in place in other jurisdictions, the MoU may not be robust and stand up to scrutiny. It was also keen to understand the extent of Jersey's involvement in compiling the MoU. These issues were raised at its recent public hearings and also in correspondence to the Minister for EDTSC.

The Deputy of St. Mary :

We have had the pleasure of having seen the MOU, but again on that, who was responsible for preparing the MOU? Was it the Home Office or yourselves or who had input into its preparation?

Chief Pharmacist:

So the MOU was prepared by the Home Office. The Deputy of St. Mary :

You had no ... giving your input, did you have any consultation with Environment or the Economic Department on that?

Chief Pharmacist:

Not formally as I recall. It was very much ... because the Minister for Health and Social Services is the licensing authority to issue licences.

The Panel wish to point out that the Minister for the Environment currently has no sight of what is proposed during the medicinal cannabis licence application stage and has had very little involvement overall with the medicinal cannabis industry. In addition, the Panel wish to draw attention to the fact that the form of Environmental Impact Assessments (EIA's) required to be submitted with medicinal cannabis licence applications is not, unlike the position with a planning application, a public document and sits outside the requirements of planning. This is discussed in more detail later in this report.

Senator S.W. Pallett:

There seems to be a lack of formal consultation for any licences. You mentioned it yourself just then. Do you think that might have been an appropriate way forward at a very early stage to have more formal discussion between the 3 departments in regards to how the regulatory system and the licensing process might work? Would that have helped?

Chief Pharmacist:

We did have ... there is a cannabis co-ordination group[4] which has officers on from various departments. It is chaired by [named officer] and the MOU and (inaudible) discussed at that meeting so there was input in that regard"[5]

The Panel asked the Minister for EDTSC how the MoU guidance currently being used in Jersey compares to approved regulations in other jurisdictions. In a letter to the Panel from the Minister dated 5th July 2021, he informed the Panel:

"The MoU is not a regulatory framework and so cannot be compared to regulations in other jurisdictions. The MoU sets out the working arrangement between the UK Home Office, as the Cannabis Agency, and Jersey regarding the process for issuing licences to cultivate cannabis in order to ensure compliance with the UN convention and any UK obligations under the Convention"[6]

The Panel, in the same letter, also asked the Minister if he was confident that working to the MoU at present, as opposed to approved Jersey regulations, would be considered robust, secure and in the best interests of the Island. The Minister responded:

"The MoU is required to satisfy the provisions of the 1961 UN Single Convention on Narcotic Drugs. Without the MoU, HCS would not be able to issue any licences to cultivate cannabis without falling foul of the Convention. The MoU will be required irrespective of any changes to domestic legislation as it is the UK that is the State Party to the Convention and not Jersey. HCS therefore need a formal arrangement with the Home Office as the UK Cannabis Agency regarding the issue of any cultivation licences in Jersey"[7]

These remarks have given the Panel cause for concern. If the MoU is not a regulatory framework, the Panel questions if the MoU by itself is sufficient to regulate the industry in the absence of any approved regulations. Under the terms of the MoU, licences are granted under the provisions of the Misuse of Drugs (Jersey) Law 1978 and are required for any operation that involves the cultivation of cannabis plants. Licences are also required for the production, possession and supply of any controlled substances derived from cannabis plants.

In a letter to the Minister for EDTSC, the Panel asked what regulations, if any, were being proposed for the issuance of licences and when did the Minister propose these draft regulations would be available for the Panel to view. The Minister responded:

"The cannabis industry must comply with existing regulations and legislation in the context of, for example, planning, environmental protection and competition. Consideration is being given to the need for specific legislation relating to cannabis in addition to Jersey's misuse of drugs legislation. Currently the focus is on income tax regulations. It is hoped that drafting will be relatively straightforward and take place over the summer months. The Treasury Minister will ensure that the draft income tax regulations are put before the Panel before they are lodged – and the regulations would need to be in force by 1 January 2022"[8]

This also gives the Panel cause for concern as it is clear from this response that the industry will continue to rely on the MoU currently in place and has no plans to introduce its own standalone regulations. The Panel understand it is necessary to have an MoU with the UK Home Office as it is the UK that is the State Party to the Convention and not Jersey.

The Panel was informed by the Minister for EDTSC that "by way of guidance, it is important that the legislation references are read in context alongside other provisions in different Orders or the actual Misuse of Drugs Law itself (or indeed the Medicines Law). Without reading the different pieces of legislation together, it is not possible to fully understand the impact and controls that are in place"[9]

Whilst the Panel understands the MoU does allow for certain regulations to be in place, it considers it imperative for Jersey to have its own specific set of regulations and thereby control (and be seen to control) its own industry. In addition, the Panel believe the current procedure of following legislation references from provision in different Orders to be confusing and technical to those without experience in law. The Panel would like to see the regulations relating to this industry contained under one piece of legislation.

5. Licence Application

Types of Licence

There are a number of different licences required for the operation of the medicinal cannabis industry depending on the activity to be undertaken. The activity varies between cultivation, possession, processing and production of products, supply and export with the full licence application requirements set out in Appendix 3 of this report. Licences can be granted under Article 10 of the Misuse of Drugs (General Provisions) (Jersey) Order 2009 for the cultivation of cannabis and under Article 3 of the same order for the production, possession and supply of a controlled substance. Licences under Article 3 are not specific to cannabis but cover cannabis as a controlled substance.

The Application Process

The Panel wished to understand the process for granting licences from the initial application stage through to approval and issuance. It asked this in written correspondence to the Minister for EDTSC and was informed of the following process [10]

• Once an application is received it is shared with the UK Home Office for assessment as part of the MoU with them.

• The Home Office revert with any questions of clarification and together with the Chief Pharmacist, arrange to undertake a joint site inspection visit and meeting with the applicants to discuss the application and their plans and test their understanding of what is involved.

• The Home Office then produce a report for the Minister for Health and Social Services detailing their observations in relation to the application and confirming whether or not the application would be compliant with the provisions of the 1961 UN Single Convention on Narcotic Drugs. This report and the application are reviewed by the Minister and a decision on whether or not to grant a licence is made together with any conditions which might be attached to that licence.[11]

The Panel was also informed that, going forward, an advisory panel would be established to advise the Minister for Health and Social Services in relation to applications prior to any final licensing decision being made and that Terms of Reference for this Panel are currently being developed.

The Minister explained within his letter that licences for medicinal cannabis could not be issued prior to identification of a suitable site and plans for the facility at the site must be submitted as part of the planning process.

"Any licence issued based on plans would explicitly prohibit the actual cultivation or processing of cannabis until the site and facilities are built and inspected and deemed to meet the necessary requirements. If the site is not developed the licence will be cancelled, or lapse at the annual renewal, and so no cultivation would be able to take place"[12]

The Panel wish to highlight that the medicinal cannabis licence application does not require the applicant to provide full details of their business case with financial predictions. Although the economic impact is discussed later in this report, the Panel believe it important that all applicants should provide a comprehensive business case which shows the reasoning behind the project, the overall  costs  and  timescales  and  all  benefits,  both  financial  and  nonfinancial  expressed  in measurable terms. Government should also use an economic viability model to measure the potential success of the applicant to ensure their benefit to the Island.

The Panel raised concern around the notification of change of beneficial ownership of the licence and was informed that:

"any  proposed  change  of  ownership  of  the  licensee*  must  be  notified  to  the  Chief Pharmacist in writing. Failure to notify the Chief Pharmacist may result in the licence being cancelled. The change of ownership must not take place unless expressly approved in writing by the Chief Pharmacist"[13]

The Panel also wrote to the Jersey Financial Services Commission (JFSC) to ascertain further clarification on the issue and was informed that upon any change in beneficial ownership of the licencee, an entity is required by the Disclosure Law to notify the JFSC of the change within 21 days. The letter went on to say:

"It would be helpful if the Chief Pharmacist would forward to us a confirmation each time a proposed change of ownership is approved or not approved so that we can check this against the register to ensure that any approved change is submitted or so that we are aware if a company tries to submit a change in ownership which has not been approved. We will look to build into our process that if a change of ownership submission is received from a company carrying out cannabis related activity, it must be accompanied by an upload of the approval from the Chief Pharmacist"[14]

Licence Application and the Planning Process

Although the process of planning applications is discussed later in this report, the Panel is aware of at least two situations where it believes the rules of planning were not aligned with the licence application criteria.

The Panel is aware through local media that unauthorised work has taken place on at least one site where a planning application for an electrical substation had been submitted for the purposes of producing medicinal cannabis. The Planning Committee had described the application as piecemeal' and explained that it should have been submitted as a retrospective application on the basis the work had already been carried out. As a result, the application was rejected.

The Chair of the Planning Committee, Connétable Philip Le Sueur stated:

I'm not happy. There are too many unanswered questions with this application. It's another example of us being asked to sanction a large site to support the emerging cannabis industry and riding roughshod over planning policy.'[15]

The Panel is also aware, again through  local media, of a planning application for a secure horticultural laboratory' at a site in St Brelade. The plans include the construction of a development of a breeding research nursery, dry store and analytics laboratory and, despite a number of concerns being raised by the Planning Committee, particularly over the lack of information about the planned usage and future occupiers of the site, the application was approved. This concern from the Planning Committee mirrors that of the Panel in that the countryside could become industrialised if future use of sites is not monitored through the Planning process. The risk of the Island's countryside becoming industrialised is discussed later in this report.

Deputy Morel , a member of the Planning Committee stated:

"It is unsatisfactory that we still don't know what this is going to be used for. It would be better to have a full site application for the site but my hands are tied by policy"[16]

The Planning Committee said that whilst the application was in line with planning policy, multiple future applications to develop other areas of the site would be viewed dimly' and the committee had no reason to reject the application even though there were many questions that remain unanswered.

Connétable Le Sueur , the Chair of the Planning Committee stated:

"I'm concerned by these piecemeal applications by people entering – and I'll say it – this new cannabis industry"[17]

In addition to the lack of information around the future use of sites, another concern raised by the Panel was the possibility that, unknown to the public or IHE, work could still be carried out on sites around the Island for the purposes of cultivating without a licence, with the expectation that the licence would come later; however, when raised at a Public Hearing with the Minister for HSS, the Panel was informed that no cannabis was being grown on Jersey without a licence being granted.

The Deputy of St. Martin :

"Can I just ask the question then, once you are happy with the plans and you issue a licence, who is responsible for making sure that the structures, buildings, whatever they are, are developed in accordance with the plans? Is it then the Planning Department?

Chief Pharmacist, Health and Community Services:

I would assume the Planning Department and the applicants. Certainly, once the facility is finished then we would back and visit again to inspect it as a finished entity. They would not be able to grow anything until we come back and do that visit as well, so there would be another joint visit and the end of the build out process.

The Deputy of St. Martin :

Okay, so to be absolutely clear, nobody is growing any medicinal cannabis on Jersey until they have had their licence approved and the premises have been finished?

Chief Pharmacist, Health and Community Services: Correct"

The Deputy of St. Martin :

That is very interesting, thank you"[18]

The Chief Pharmacist's assumption that it is the Planning Department who have the responsibility for ensuring that the structures, buildings, etc are developed in accordance with the plans is concerning to the Panel particularly as it was informed by the Minister for the Environment that the Planning Department has had little or no involvement with the medicinal cannabis industry. Whilst it is clear from the Planning regulations that this would ordinarily sit under the responsibility of the Planning Department, this is a new industry and the lack of alignment with other Departments is a cause of concern.

The Panel is also concerned that the usage of utilities such as water and electricity are not included within the application process. The Panel has been informed that the use of these utilities can be extensive and without them being addressed at the licence application stage, with future plans put in place for usage, there is potential for the licence holders to have no choice but to tap' into the Island's existing water and electricity sources.

Licence Costs

The Panel understands that the maximum fee that is allowed to be payable to the UK Home Office for undertaking their work in the application of licences is £2,500. The licence fees charged by Jersey are set out in legislation and can be found within at the Misuse of Drugs (Licence Fees) (Jersey) Order 2020.

In a letter to the Panel from the Minister for EDTSC dated 7th May, he stated

"The initial licence fee to cultivate, produce, possess and supply cannabis is £7,500 with an annual renewal fee set at £3,750. The fee was set taking into account of UK fees set in 2010 and the time taken in dealing with licence applications in Jersey in order to ensure, as much as possible, that full costs are recovered. The level of fees was also considered by the Misuse of Drugs Advisory Council prior to being set in legislation"[19]

The Panel asked if there was any proposal to increase the licence fee or make it an annual cost as opposed to a one off and was informed that the "level of fees will be kept under review"[20]

By contrast to other jurisdictions, this fee appears to be low and the Panel is concerned it may not cover the costs for, not only the licence fee administration, but the ongoing work required from the office of the Chief Pharmacist.

As a comparison, the licence fee in Malta is an initial 100,000 and a maximum ongoing annual fee of 63,000 per annum.[21]

In Guernsey, the fee payable to the UK Home Office is not stated but it is likely to be the maximum fee allowed of £2,500. However, the licence fee for a single entity on a single cultivation site under 5 acres is £4,800 with at least £1,100 added per extra 5 acres of land used. In Guernsey, a fee of £1,600 is payable for a processing plant for medicinal cannabis products, £1,100 for each warehousing facility and £100 per shipment for a commercial export.[22]

The  Decree Law No. 8/2019, of 2019-01-15  in  Portugal states the fees for cultivation to be 3000.00, for manufacturing 3000.00, import /export 1200.00g and for wholesale trade, including transport and circulation, 1000.00 [23]

For France, "Medicinal products must obtain a marketing authorisation to be marketed in the European Union." "In 2020, the fees for a decentralised/mutual recognition marketing authorisation application amounted to 55,000 and 35,700, respectively, depending on whether France acted as the reference member state (RMS) or not."[24]

As discussed above, the Panel is concerned the low licence fee will not cover costs for the office of the Chief Pharmacist, let alone additional overheads. The Panel raised this in its letter to the Minister for EDTSC and was informed

"the level of fees set should provide sufficient funding for the engagement of support for the Chief Pharmacist"[25]

At the time of asking these questions, two licences had been granted and whilst the Panel is content the level of fees may be adequate at the current time, it may not be the case in the future should more licences be granted.

6. Planning and the Environment

Overarching Scrutiny – EIA and EHI Scrutiny Panels

At the beginning of the Panel's review, it was cautious not to encroach into areas of Planning and Environment and was in regular dialogue with the Environment, Housing and Infrastructure Scrutiny Panel (EHI) to ensure it was aware of the Panel's Terms of Reference and overall objectives in undertaking a review into the regulatory side of the medicinal cannabis industry. As the review progressed, it became clear the EIA Panel could not ignore certain planning and environment issues that intertwined with the licence application and overall process. It was agreed the Panel would review any planning and environmental issues that arose whilst adhering to its own Terms of Reference. The Panel identifies such planning and environmental issues in its various findings and will be pleased to co-operate with the EHI Panel in any further review considered appropriate.

Department of the Environment

As previously discussed in this report, the Minister for the Environment has stated that he has had little involvement in the promotion of the medicinal cannabis industry. He went on to state that any exposure he had had arisen as a result of views expressed by members of the public and other States Members.

The role of the Department for Infrastructure, Housing and Environment is defined on the gov.je website as:

We aim to safeguard Jersey's natural and historic environment by giving guidance to planning and building in Jersey.

We are also responsible for:

• island planning and policy

• environmental management and the rural economy

• environmental policy and awareness

• environmental protection (waste and water)

• environmental health

• animal health and welfare

• marine resources and fisheries

• meteorological services

The Panel believe that with these responsibilities falling under the remit of the Department for Infrastructure, Housing and Environment, it should have a much more defined role in Jersey's medicinal cannabis industry.

The Planning Application Process

It should be noted that should an existing agricultural glasshouse currently growing crops change to growing cannabis, this will not require planning permission because the use is essentially the same. The  planning  regulations  will  only  apply  to  new  builds,  fencing  and  new  uses,  such  as  the introduction of light industrial processes

Jersey has strict guidelines that must be followed in order for planning approval to be granted to proposed developments.

To illustrate how it compares with the current procedure for an application for a medical cannabis licence, this paragraph summarises such procedure in the case of a planning application.

Submitting your application and payment

You need to submit your application using the relevant form and with the correct information so anyone can understand the proposal.

When you've submitted your application, we'll review it to make sure it contains the minimum level of information required to understand the proposal. If your application doesn't contain the information we need, we'll return it to you and explain what needs to be provided.

If your application does contain the information we need, we'll send you a fee breakdown with information on how to pay. Once your payment is received, we'll register your application.

We aim to register your application within three working days from receiving the correct information and a full fee.

• Site notices, publishing your application and comments

We will send you one or more site notices that you'll need to clearly display on the property for 21 days. The site notice is to make other people aware of your proposal so they can comment if they wish.

We'll also send you a form that you need to sign and return together with photographs that clearly show the position of the site notices around the property. This should be submitted after the 21 day period to confirm that the site notices have been displayed for the full period.

• Publishing your application

We'll publish your application so other people can comment on:

• the Jersey Gazette Official Notices

• the Planning Register

• the Jersey Evening Post every Tuesday

Comments can be made within 21 days of any of the above publication dates. We may consider comments after this timeframe provided the application has not already been determined.

We'll consult organisations that may wish to comment on your application. We request they respond within 21 days however we'll consider comments received after this timeframe if the application hasn't already been determined. If they don't respond, we may assume they've no

comments to make. If your application raises complex issues we may extend the consultation period.[26]

The Panel firmly believe that the rules currently in place for planning applications should also apply to the medicinal cannabis industry. From the Panel's evidence gathering, it has become clear there are rules being applied to the medicinal cannabis industry which are similar to those currently in place for agriculture, in particular, glasshouses currently used for agriculture do not require planning application if they are to be used to cultivate cannabis. The Panel believe these rules to be inadequate for the cannabis industry and should be modified and made to fit in accordance with this business. The Panel is also concerned the current agricultural rules could be used as a loophole' to cultivate and export cannabis. As previously mentioned, the internal refurbishment of glasshouses does not currently require planning permission, but it should be noted that the Minister for the Environment is actively considering changing this exemption.

Exportation of Medicinal Cannabis

No export of cannabis can take place without a specific export licence being issued for each consignment to be exported. Any such licence can only be issued on receipt of a corresponding import licence from the competent authorities in the destination jurisdiction as required by the 1961 UN Convention. "Cannabis is a controlled drug just like any other controlled drugs under the Misuse of Drugs Law and the Misuse of Drugs Law provides in general that the import or export of controlled drugs is prohibited unless in accordance with a specific licence for that import or export"[27]

The Panel was keen to understand how the export process worked and the different grades of cannabis which could be exported and how. At a Public Hearing, the Panel was informed that any imports or exports of cannabis would need to be in accordance with a specific licence granted for that purpose under the Misuse of Drugs Law. The Panel was further informed that the licence would be independent of any other licences that may or may not be in play in regard to the manufacture of products within the industry. "So in order to export anything from the Island there would need to be a specific licence for that specific consignment to be exported out of Jersey"[28]

As advised earlier in this report, EU/GMP licences, amongst other things are granted for the export of cannabis that comply to GMP standards in relation to the production of Active Pharmaceutical Ingreditnet (APIs) or Cannabis Based Products for Medicinal Use (CBPMs).[29] This certification is the highest recognition available for companies in the pharmaceutical sector and involves rigorous testing of the product to ensure that not only the product, but the company, is compliant with strict EU regulations. Without having this accreditation, it is possible for lower grade crops to be exported under current rules however, the Panel understands that cannabis products can only be exported to companies in other jurisdictions who hold EU/GMP accreditation. It would then be the responsibility of the EU/GMP company to have negotiated the quality of the crop and its grading. The Panel has recommended that all products being exported from Jersey should be exported under the EU/GMP accreditation and has recommended the current rules are amended to reflect this.  The Panel believe that without this accreditation, Jersey could be seen as an Island where lower grade medicinal cannabis is being exported which could tarnish the reputation not only of this industry, but the Island as a whole.

Environmental Impact Assessments

Environmental Impact Assessments (EIA's) can form part of the planning application process and must be submitted for proposed developments that may have a significant impact on the environment. They are public documents and can be used to alert the public to proposed developments currently being reviewed by planning. Whilst it is now the case that an EIA must be submitted on application for a medical cannabis licence, it is to be noted that it does not have the same meaning (or effect) as one in relation to planning inasmuch as the cannabis EIA is not made public. To better consider whether aspects of the EIA (in planning terms) could be successfully transposed to the medicinal cannabis licence application process, the Panel considered it necessary as part of its review to look into the position of EIAs in the planning process.

Further details of an EIA can be found below from information taken from www.gov.je.

An Environmental Impact Assessment (EIA) is a process that identifies both the positive and negative environmental effects of proposed developments prior to planning permission being considered. It aims to prevent, reduce or offset any identified significant adverse environmental effects of development proposals.

The EIA process is a method of ensuring that planning decisions are made in the full knowledge of the environmental effects and with full engagement of statutory bodies, local interest groups and members of the public. The responsibility of completing an EIA lies with the applicant.

When to get an EIA (Screening)

Environmental Impact Assessments (EIA) are required for proposed developments that may have a significant impact on the environment. The requirement for an EIA will only affect a small number of projects in Jersey. The EIA Order specifies a range of developments which require an EIA. Any changes or extensions to a development that was previously subject to an EIA will also require an updated EIA. [30]

The Panel raised the issue of EIA's with each of the Ministers it invited to Public Hearings in order to understand where the process of submitting an EIA fitted into the overall process of the issuing of licences for medicinal cannabis.

At its hearing with the Minister for Health and Social Services, the Panel was informed that the need for submitting an EIA was a relatively new idea and that, whilst no licences had been issued for permission to grow or cultivate anything without having submitted an EIA, it was not something that had originally formed part of the medicinal cannabis licence application process. The Panel was further informed that the submission of an EIA was not something that was a requirement by the UK Home Office; however, it was felt that it would be helpful in Jersey given the likelihood of nearby neighbours, that land is constrained and to ensure applicants give due consideration to the impact of what they are doing.

The Panel asked at what stage in the process was the EIA due to be submitted:

The Deputy of St. Mary :

"I see the guidance in respect of the Jersey Licence Application does make reference to the applicant having to provide an environment impact assessment. Does that happen before you inspect or does it take account of the matters you raise during inspection or perhaps you could elaborate on that, please?

Chief Pharmacist, Health and Community Services:

Yes, that is something which, as we progress through this, we felt would be a useful addition to an application so the current application, we expect that to be delivered with the application so in advance of any inspection and in advance of everything else so that we would have sight of it and we could raise any questions that we need to around that. One of the current licence holders, when their licence was being considered, it was a condition upon granting the licence that they provided one because we had not fully developed the application process at that stage. All future applications would include that assessment with the application upfront.

The Deputy of St. Mary :

Just to clarify, are you saying therefore this EIA (environmental impact assessment) is a relatively new idea and that applications might have already been granted without one having been issued?

Chief Pharmacist, Health and Community Services:

No one has been issued a permission to grow or cultivate anything without having submitted an EIA. Yes, it a new thing, the Home Office do not require it in the U.K., it is something we felt might be helpful in Jersey given that land is constrained and we want to make sure that applicants are given due consideration to the impact of what they are doing"[31]

Whilst the Panel was encouraged that the process of producing an EIA as part of the application process had been implemented, it was less encouraged to learn that the EIA, as part of the application process, would not be made public therefore  denying members of the public the opportunity to comment on the potential impact the proposed development would have on residential properties and the surrounding areas. This is in contrast to an EIA being submitted for the purposes of standard planning applications. If the whole purpose of an EIA is to identify both the positive and negative environmental effects of proposed  developments prior to planning permission  being considered, the Panel questions why they are not made public at the medicinal cannabis licence application stage.

The Deputy of St. Mary :

"The concern I have, which is clear from the emails we have had on the matter, is that certain activities are carried out without local residents knowing about it. What I am asking I suppose is, is this environmental impact assessment publicised and do the public have the right to contribute and make representations as to what their concerns are, or is purely behind closed doors?

The Minister for Health and Social Services:

I think it would only be given publicity if it was also part of any planning application but not if it is simply prepared for the purposes of an application to me, because there is no public

notice given of these applications under the Misuse of Drugs (Jersey) Law. It is entirely an internal process. There is no opportunity for the public to comment or likewise"[32]

The Minister for HSS went on to explain to the Panel the reason why the EIA's were not made public was due to the fact there was no option to do so within the Misuse of Drugs (Jersey) Law.

The Minister for Health and Social Services:

"Once or twice neighbours who had become aware of the use of premises nearby have written to me. It is just that there is no facility, no option within the Misuse of Drugs (Jersey) Law to make public the fact an application has been made. It may be that should change, I do not express any particular view. I am not the Minister who is responsible for the policy but you will know that the policy approach is that this is an agricultural use and merely by growing cannabis instead of any other crop there is not necessarily a change in use or intensification. That is why we have particularly wanted to make an environmental impact assessment a requirement so that we could go some way towards addressing these questions and getting an independent review as to whether there was likely to be any risk to neighbouring properties"[33]

During its Public Hearing with the Minister for the Environment, the Minister described an EIA as an open and transparent document stating:

The Minister for the Environment:

"An environmental impact assessment done under the Planning Law and under the laws, it is really important to know that it is a public document. In other words, that the assessment is published and, therefore, it is open and transparent. I am not aware what the Minister for Health and Social Services has proposed to, whether it is open or not; I really do not know"[34]

The Panel finds it concerning that members of the Public are not consulted or given the ability to provide input on issues of the environment prior to medicinal cannabis licences being granted.

The Panel probed further into the area of EIA's and raised the subject it at its hearing with the Minister for the Environment. The Panel asked the Minister to what extent his Department was involved in the overall monitoring of the EIA at application stage and beyond. The Panel was surprised to hear that it seemed there was very little involvement and the Minister was not aware of what procedure was in place for the Minister for HSS to be involved in the assessment.

The Deputy of St. Mary :

"Can I ask, Minister, to what extent are you involved in monitoring the replies to that or commenting on the result of that?

The Minister for the Environment:

I know what I have read only through the media. I have not had that conversation with the Minister for Health and Social Services. I know that the Minister for Health and Social Services up to now has been responsible for the licensing, which is, if you like, the regulatory side of medicine or cannabis. I am puzzled, and I think the team may have to help me out here, at the moment an environmental impact arises under one of the pieces of planning legislation. There is an order that specifies the circumstances in which environmental impact assessments are required in respect of developments.

Of course having such a process means that somebody has to assess what the impact assessment is and the general approach is to identify what issues arise environmentally; what are the impacts? Also, to investigate mitigation measures and those mitigation measures are part of the planning judgments that get made on an individual application. There is a process there. What I cannot answer you is how this assessment, that has been proposed by the Minister for Health and Social Services, fits into the planning process. I am not aware that there is a procedure in place for that but I am sure I may be out of date and the officers can help me, please"[35]

An officer from the Department of Infrastructure, Housing and Environment who accompanied the Minister to the Public Hearing informed the Panel that perhaps the Minister for HSS, when referring to the EIA, was in fact referring to other environment checks that were intended to be brought as part of the licence application process and not in terms of the Planning and Building regulations.  

The Panel informed the Minister for the Environment of the recently received correspondence from the Minister for HSS, where the Panel asked for an overview of the medicinal licence application process and EIA's were discussed. The Panel was keen to understand if the Department of Infrastructure, Housing and Environment had come across' any of the EIA's required for the licence application process, understanding these would ordinarily be approved by this Department for a standard planning application.

The Deputy of St. Martin :

"I would just like to say to the Minister, one of the questions we put to the Minister for Health and Social Services and his officers in writing was: can you kindly give us an overview of how the application process works?

Part of the answer to that question is this: "Once the report from the Home Office is received" and this is after the application has been put in: "together with the original application, is presented to the Minister who will take advice from the chief pharmacist and any others he thinks appropriate in relation to the content of the application, for example, the police in relation to the security report provided by the applicant and Environmental Health in relation to the environmental impact assessment provided by the applicant." Minister, can I ask, have the Environmental Health Department under your remit seen any environmental impact assessments, please?

Director, Natural Environment/Acting Group Director, Regulation:

I have not seen any specifically come my way but I wonder whether [named officer] is able to elaborate on that. I think you are right, I think this is a separate process and I know that the Head of Biosecurity has had engagement in discussions about the licensing with the Health team, that that differentiates between us, as we have said, an EIA process that would be run under planning process and an EIA process that would be run under a different auspice. But in terms of specific documentation, EIA documentation coming our way, I have not been notified about any of it, unless it has gone directly to the Environmental Health officer"[36]

The Minister for the Environment:

"Chair, may I just check with [named officers] whether they have seen any such because I would like to know"[37]

Head of Development and Land: No, we have not seen any"[38]

The Head of Biosecurity informed the Panel that part of the confusion seemed to stem from the wording and that, when repurposing existing infrastructure, the Department of Planning should definitely have received an assessment of the impact on the environment. He went on to say that the wording had possibly been transposed in a slightly different order and agreed there needed to be some finessing as to how the environmental impact of these operations are assessed.

Head of Biosecurity:

"I think part of the confusion here stems from some of the wording. I fully agree that when repurposing existing infrastructure we should have possibly, or we definitely should have, an assessment of the impact on the environment. But I think people referred earlier to the fact that there is an official definition of an environmental impact assessment and so possibly if those words had been transposed in a slightly different order we would be in a different situation where environmental considerations should be at the fore of these issues. But what we have got at the moment is we are repurposing existing infrastructure and so the environmental impact of doing that is much lower than building a new facility on a green site. I think there needs to be some finessing as to how we assess the environmental impacts of these operations"[39]

The Panel agrees that the wording between an EIA and an assessment of the impact on the environment should be clarified.

Following this line of discussion, it was clear the Department of the Infrastructure, Housing and Environment had not seen any EIA's for the current licence holders.

The Deputy of St. Martin :

"I accept that answer but can I ask again the question: have you seen any environmental impact assessments?

Head of Biosecurity:

Not across my desk, no"[40]

The Panel and indeed the Minister for the Environment were surprised at this, especially considering the Minister for HSS had informed the Panel that both licence applications had been accompanied by an Environmental Impact Assessment.

The Deputy of St. Martin :

"Okay, is it a surprise then, Minister, to hear that the Minister for Health and Social Services told the Panel that both the applications for licences were accompanied by environmental impact assessments?

The Minister for the Environment:

It is news to me and in fact it is not the first time that our Government fails to operate in a co- ordinated way. I think the Deputy knows my concerns about the problems that we have got in our structure of our organisation at the moment. But I do think in everybody's defence, I think, this is an emerging industry and it is something we are going to have to organise for and organise differently, I believe. What I do have a concern about, because I was not aware of the details that the officers have just confirmed, that we had not seen that information. I think it is troubling when Minister X says publicly that we have got these assessments and yet they are neither public or none of the officers responsible for environmental impact assessments have seen them. That cannot be a satisfactory position and something we will have to no doubt your report will highlight that and it is something I certainly will need to sort this out"[41]

As previously discussed in this report, and as one of the recommendations made by the Panel's advisers, synergies need to be established between the Minister for Health and Social Services, the Minister for Economic Development, Tourism, Sport and Culture, and the Minister for the Environment to devise an adequate framework to assess the environmental impact of any application.

7. Security

Cannabis is a narcotic drug with a high illicit value and the Panel believe that appropriate security arrangements should be a central concern for Jersey's medicinal cannabis sector, with a range of considerations  factoring  physical  security,  cultivation  procedures,  personnel  security  and transportation security. From the evidence gathered and following comments from its advisers, the Panel is concerned at the lack of security considerations, not only at application stage but throughout the whole process. The Panel firmly believe that security measures implemented at medicinal cannabis cultivation sites will require a robust, external monitoring and compliance audit.

The Panel and its advisers have reviewed the current medicinal cannabis security and traceability requirements in Jersey and understand that as part of the licence application process, applicants are expected to provide:

• A security assessment report prepared by an independent security adviser/specialist

• A full description of site security arrangements, including as a minimum, details of; CCTV, perimeter fencing, lockable physical security and presence/attendance of security guards

• Details on any electronic alarm system, to include details such as the installation company, alarm servicing and the level of police response

• A description of how they will comply with the safe custody requirements of the Misuse of Drugs (Jersey) Law and subordinate legislation, including stock recording, separate storage rooms and zoning, safes and prefabricated strong rooms and whether or not controlled

substances are kept only on site.

It should be noted that these security requirements do not necessarily need to be put in place prior to any cannabis licence being granted. It is the opinion of the Panel that site security measures need to be in place before any commercial operations to cultivate medicinal cannabis commence.

The Panel also believe that sufficient resources should be  provided by applicants to ensure appropriate levels of staff training and screening are in place. However, despite the requirement for a "person responsible for the security of the premises to be licenced",[42] the Panel note the absence of  specific  requirements  for  staff  training  and  screening  in  the  medicinal  cannabis  guidance documents.

In their report, the Panel advisers also explain that there should be resource available for "Providing training given the peculiar requirements of this industry." And that, "Additionally, it should be ensured that a methodology is in place for an ongoing screening process on the applicant company as well as its officers and employees." The requirement for staff training and screening is also considered an important prerequisite for medicinal cannabis cultivation in other jurisdictions. The Australian Office of Drug Control stated that "While physical security systems and procedures play a critical role in preventing diversion of cannabis, a rigorous personnel security model is also necessary."[43]

States of Jersey Police

Although the Panel did not undertake a call for evidence from members of the Public, it did ask for written submissions from key stakeholders, one being the States of Jersey Police (SoJP). The Panel asked the SoJP what involvement they have had in the initial development of the Jersey medicinal cannabis industry and what the responsibilities of the SoJP would be. It was informed that the SoJP will "not be directly involved in the policing of the medicinal cannabis production in Jersey, the responsibilities of SoJP will be in relation to any response to a crime occurring that requires a Police presence and investigation"[44]

At its Public Hearing with the Minister for Health and Social Services, the Panel raised the issue of security and it seemed it was not something that had yet been decided upon. The impression was given that security would be reliant upon recommendations from the UK Home Office.

Chief Pharmacist, Health and Community Services:

"We as part of the application require a security assessment to be submitted by the applicant to address the issues that are contained in Home Office guidance on security arrangements and that is available at the time the Home Office come to do their inspection. We are very strongly guided by the Home Office in terms of the basic principles being satisfied and then we have the option to consult with local agencies as we need to, to see whether there are any local factors that should be considered.

The Deputy of St. Mary :

Thank you for that. You say it is an option. Is it a question that as a matter of course you would get local advice or would you take a view yourself if there did not appear to be any particular problem?

Chief Pharmacist, Health and Community Services:

I think if the view from the Home Office was that everything was acceptable and in order then you would perhaps not necessarily need to take advice. The Home Office are the experts on this. They do it regularly in the U.K. They assess the security arrangements around these businesses in this industry, so they provide a very strong steer on whether the security arrangements are appropriate or not"[45]

The Panel is concerned that, although a security assessment needs to be submitted at medicinal cannabis licence application stage, there are no clear milestones set out as to what needs to be put it in place following submission of the medicinal cannabis licence application.

In an anonymous submission to the Panel from a private security firm, it was stated that:

Anonymous Submission:

"I strongly recommend that all facilities have a dedicated Police liaison officer who meets with the security team weekly to ensure that intelligence is feeding to and from site so that the security envelope is not threatened and remains robust and measurable."[46]

Customs and Immigration Service

The Panel recognise that the Jersey Customs and Immigration Service will play an important role in controlling the import and export of medical cannabis product and believe that resources should be made available to ensure suitable training is provided. The Panel's advisers stated, "the Minister for Health and Social Services and the JCA to ensure that Customs are well-informed and educated about the process"  and "a change in approach would be mandated from their end, possibly necessitating training for the officials responsible for this aspect".[47]

Private Security

The Panel believes the solution to security for this industry is through private security firms. This would eliminate the pressure on the SoJP and other public services within Parishes such as the Honorary Police. At a meeting between the Panel and its advisers on 26th August 2021, the Panel advisers  explained  that  many  local  and  international  private  security firms  could  provide  the necessary security advice to on-Island medicinal cannabis cultivators. The advisers went on to say that an audit of the security requirements should be carried out by an external party to ascertain what security would be required, following which this could form part of the application process.

The Panel believe that the medicinal cannabis industry could provide new opportunities for locally based private security contractors and provide medicinal cannabis cultivators with comprehensive site security options. In their submission to the Panel, G4S Secure Solutions (Jersey) informed the Panel that,

"G4S are engaging with the industry in Jersey to ascertain the level of security they are anticipating  will  be  required.  We  would  envisage  an  increase  in  manned  guarding requirements (searching staff out), security systems installation (CCTV, INTRUDER, Fire Detection) and on-going maintenance of these systems".[48]

The Panel is keen to ensure that adequate security resources are available on-Island to medicinal cannabis cultivators and was encouraged by an anonymous submission from a private security firm that stated, "The local security industry will certainly be challenged to meet the required standard, but I am confident that there are sufficient number of us who will be able to do this to supply good quality resilient security for these new businesses".[49]

The Panel believe that many questions in relation to the provision of physical site security, personnel and transportation security remain unanswered. In particular, the Panel is concerned about the absence of an independent site security monitoring and compliance audit, as well as the absence of a requirement for suitable staff training and screening measures from key departmental guidance.

However,  the  Panel  is  encouraged  by  the  substantial  presence  of  on-Island  private  security contractors, and their ability to support the development of the medicinal cannabis industry in Jersey.

Responsible or Qualified Person

It became apparent through discussions with its advisers and evidence gathering that it is a requirement at licence application stage that a person is designated to be the licence applicant's person responsible for regulatory affairs. Although there is nothing predetermined in terms of the qualifications necessary for the role, the person should be of good repute and have passed the due diligence process in place (currently enhanced Disclosure and Barring Service checks (DBS)). In a letter received by the Minister for EDTSC, the Panel asked the difference in standard and enhanced checks and was informed that:

"DBS checks can be obtained by applicants from a number of registered providers of criminal record certificates on payment of a fee, completion of a form and verification of identification. A standard DBS check shows offences and cautions recorded on the Police National Computer including spent and unspent convictions. An enhanced DBS check shows the same information plus relevant information provided by police authorities"[50]

The Panel has considered if this process of screening is robust and secure enough to engage the responsible person. Without the pre-requisite for qualifications necessary for the role, it is difficult to ascertain if the responsible person nominated may have the required skill set to undertake the regulatory requirements necessary in this position.

The Panel is aware there is a role within the industry for a qualified person' in the UK and indeed in Jersey and asked what the role of the qualified person was, and how this differed from that of the responsible person. It was informed that due to Jersey having a full manufacturing licence, legislation specifies that in order to release finished medicinal cannabis products to the market, a qualified person is required. The qualified person must have experience in production and the release of medicinal products.

Chief Pharmacist

Some jurisdictions have 2 types of manufacturing licence: a manufacturing specials licence and a full manufacturing licence. We only have one, which is the full manufacturing licence. In legislation it specifies that in order to release finished medicinal products to the market, that must be released by a qualified person. A qualified person is defined in legislation. It is somebody with certain qualifications; a pharmacist or a chemist who has experience in production and release of medicinal products'[51]

The Panel was informed that there is a register of qualified persons to which the Minister for Health and Social Services has access. The qualified person would provide the service on Island as and when required.

In Malta, both the responsible person and the qualified person roles are carried out by one individual. This individual must be recognised by the Medicines Authority to act as such (they must be a pharmacist registered with the Maltese Pharmacy Council and must be resident in Malta). The responsible/qualified person in Malta has responsibility for keeping an up-to-date register to document and certify each production batch.

The Panel was informed that  the system used in Malta where the qualified person and the responsible person are one and the same is not the system that would be used in Jersey.

Disposal

It was unclear to the Panel how the harvested medicinal cannabis crop would be disposed of, following its cultivation and extraction. The Panel is concerned that should the disposal of the product not be specially treated, it could become harmful and fall foul of hazardous waste disposal regulations. The Panel asked for clarification around disposal and was given this response via email correspondence from the Chief pharmacist:

"If there are any controlled parts of the plant (i.e. leaves and flowers) or any cannabis oil extract that are not required for supply to customers, or for internal process validation or quality assurance procedures, they will need to be destroyed. Each licence holder has a named individual who is authorised under the Misuse of Drugs Law to personally witness and record any destruction. Each licence holder will have a Standard Operating Procedure (SOP) covering the destruction of controlled substances. The actual method of destruction is not mandated but destruction must render the controlled substance permanently irretrievable. In practice this will most likely be by witnessed incineration in the clinical waste incinerator – in a similar manner to that employed by the police and customs. The licence holder is responsible for ensuring the security of the controlled substance in transit form their premises to the clinical waste incinerator This method of destruction has been endorsed by the UK Home Office"[52]

The Panel is reassured to know that the disposal of the product is controlled and has been endorsed by the UK Home Office, however, it has led it to have further concerns around the appointment of the responsible person' (or named individual), their responsibilities within the company and the necessary qualifications to undertake this role.

8. European  Union  Good  Manufacturing  Practice  (EU/GMP) Certification

EU/GMP certification is the highest recognition available to companies in the pharmaceutical sector and involves rigorous testing of products to ensure that not only the product, but the company, is compliant with strict EU regulations. Obtaining EU/GMP accreditation shows that the company has been scrutinised and approved by the EU/GMP licensing authority and that it meets the required standards and that the product is of a high quality (products that comply to GMP standards in relation to the production of Active Pharmaceutical Ingredient (APIs) or or Cannabis Based Products for Medicinal Use (CBPMs). Without having this accreditation, it would be possible for lower grade medicinal cannabis crops to be exported from Jersey which would not stand up to the high standard of EU/GMP and could result in a negative impact on the jurisdiction of export. It is the standard by which European pharmaceutical companies are held, and has already been established for medicinal products that are sold in Europe. EU/GMP details the production, handling, storage and packaging of cannabis.

Licences which are issued in Jersey currently do not require the applicant to have EU/GMP accreditation.

For the application of the European GMP certificate, pharmaceutical companies have to follow these six steps:

1. Preparation of administrative and production site documents
2. Submission of dossiers to the licensing authority in Europe
3. Arrangement of plant inspection appointments
4. Organisation of plant inspections by the licensing authority
5. Procurement of the inspection report and issuance of the GMP certificate
6. Obtainment of the GMP certificate

Application Process for the European GMP[53]

The Panel has found no evidence of a requirement for medicinal cannabis licence holders to have to obtain EU/GMP accreditation. This concerned the Panel for a number of reasons:

• If the licence holder does not have EU/GMP accreditation, they can still harvest and export the product under its raw' form.

• If a licence holder is awaiting EU/GMP accreditation before it can process the raw product', where will the product be stored and under what type of security?

• Without the EU/GMP accreditation, lower grade crops could be exported off Jersey potentially damaging the reputation of the Island.

The Panel asked the Chief Pharmacist what mechanisms are in place to ensure a medicinal cannabis licence holder would be compliant with the EU/GMP rules, should they wish to begin manufacturing and exporting the finished product.  [54]The Panel was informed that the Jersey Cannabis Agency is not authorised to grant EU/GMP Certification for exportation and any exportation of a manufactured finished product would be under a separate EU/GMP assessment and not carried out in Jersey. The Panel was keen to understand the process behind the decision making and was informed that decisions are taken by the Medicines and Healthcare products Regulatory Agency (MHRA) and not ruled upon in Jersey.

Senator S.W. Pallett:

Moving on, once a determination is made by the decision-making authority following a dispute what accountability mechanisms are in place to ensure that the decision is in line with established practices for the cultivation of medicinal cannabis, such as the EU (European Union) GMP standard, for example?

Chief Pharmacist, Health and Community Services:

The EU GMP standard we would invite the MHRA to determine whether something is or is not in compliance with that, because they are the experts. We would not have to rule on that ourselves.

Senator S.W. Pallett:

So that is advice you receive from the U.K.?

Chief Pharmacist, Health and Community Services: Yes.

Although there is no defined time as to how long EU/GMP accreditation will take, the Panel has been advised that due to the rigorous testing and inspections involved, it could take at least two years from the date of the initial medicinal cannabis licence being granted. It should be noted however that each jurisdiction is different and this is the estimate given for the accreditation to be granted for a medicinal cannabis licence holder in Jersey. Whilst the Panel is pleased to note the road to EU/GMP accreditation does not seem simple and requires rigorous testing, it is also concerned that the process involved in obtaining this accreditation could discourage some medicinal cannabis licence holders from applying, resulting in lower grade, unprocessed cannabis crops being exported from Jersey.

The importance of obtaining the EU/GMP accreditation should not be under estimated. Jersey has a global reputation for quality production and robust regulations which it must preserve and enhance. In  striving  for  EU/GMP  accreditation,  medicinal  cannabis  licence  holders  would  then  provide reassurance about high quality and regulatory standards within Jersey.

The  Panel  heard  from  a  current  licence  holder  who  explained  the  importance  of  EU/GMP accreditation in its written submission. It stated that:

For Jersey producers looking to export finished products, it is imperative that GMP remains a statutory requirement because a regulatory regime that could be perceived to fall short of EU standard would create the risk of EU importers discriminating against products made in Jersey'. As EU GMPs are currently the strictest cannabis manufacturing standards in the world, adherence to EU GMP will provide Jersey producers with unhindered access to global medicinal markets.[55]

Cultivation and Processing Sites

Throughout the course of its evidence gathering, the Panel became informed of the different processes involved in the medicinal cannabis industry, the licences required for each of the processes, and the regulations involved in each. As previously mentioned, the Minister for HSS is authorised to issue licences under the terms of the MoU.

There are various cultivation licences available which can be granted by the Minister for HSS, these are a:

• Licence to cultivate plants of the genus cannabis with a THC content not exceeding 0.2% (Industrial Hemp)

• Licence to cultivate plants of the genus cannabis with a THC content exceeding 0.2%

• Licence to produce, to supply, to offer to supply and to possess any controlled drug or any preparation or product containing a controlled drug

• Licence to produce any preparation or product containing a controlled drug and to supply, to offer to supply and to possess any controlled drug or such preparation or other product

• Licence to supply, to offer to supply and to possess any controlled drug

• Licence to possess any controlled drug[56]

The Panel was keen to understand how the product would be managed once it had been harvested and was at the processing stage. In particular, the Panel wanted to know how the crop would be stored and if the storage of the crop would be facilitated on the existing cultivation site.

The Minister for EDTSC informed the Panel that the Island did not want to have an industrialised countryside and it was possible that any processing of harvested crops could be done on separate sites.

The Minister for Economic Development, Tourism, Sport and Culture:

"On the site the level of activity that is going to be undertaken, I mean, we do not really want to have an industrialised countryside. We have areas, trading estates and appropriate areas for industry and we have areas for agriculture. Depending on what the perhaps I ought to pick up where I left off very quickly, which talks about what happens after cultivation and the extraction, then the opportunity for manufacture, which possibly would have to be done on separate sites"[57]

The Minister's statement was supported by the Chief Pharmacist who informed the Panel:

Chief Pharmacist:

"Just because you cast out sites, it is just initially led and someone else you could cultivate, potentially, barley, dried flowers, the extraction facility, the GMP requirements that the active substances that are used to start (inaudible) of medicine, which could then supply to another facility. Absolutely, yes, so I think there are various ways of delivering it"[58]

The Panel does not have confidence in these comments by the Chief Pharmacist as it is not being confirmed one way or the other as to whether or not the processing of the crop would be carried out in a separate facility. The Panel believe more consideration needs to be given as to whether sites

are for cultivation and/or processing and the Panel is of the opinion this key area has not been given any forethought. The Panel is aware of concerns around Planning applications for the medicinal cannabis industry and the Panel believe there is the potential for cultivation sites, with planning approval for "cultivation only" could be developed further and also be used as processing sites. Without the right checks and balances, this has the potential to turn the countryside into an industrial processing site, something the Minister informed the Panel he would not want and, indeed, to which the Panel believe most Islanders would be strongly opposed.

8. Overall Responsibility

Ministerial Responsibility

The Panel, prior to undertaking the review, had understood the Minister for EDTSC had overall responsibility for the medicinal cannabis industry; however, as the review progressed, it became apparent that no one Minister had overall responsibility for the industry in its entirety. The Panel learnt that the Minister for HSS has responsibility for the issuance of licences (in his capacity as the sole member of the JCA), with the Minister for EDTSC holding responsibility for the overall economic development and rural economy. The Minister for the Environment's role on planning and environmental issues remaining unchanged (but otherwise having little or no input as previously highlighted), the Panel did not see Planning and Environmental Regulations being suitably aligned with the licence application process and has raised its concern.

The Panel asked the Minister for EDTSC if he could explain the overall ministerial responsibility for the medicinal cannabis industry and define the roles for both himself and the Minister for Health and Social Services. The Minister explained his role stemmed from the rural economy strategy.

The Minister for Economic Development, Tourism, Sport and Culture:

"So, the interest of my part in the medicinal cannabis industry stems from the rural economy strategy. The department has overall responsibility for that. Since the last rural economy strategy was launched, one of the key aspects of that strategy was to identify more high-revenue crops to increase the variety and sustainability of the agricultural sector, given the challenges faced by the arable sector currently"[59]

The Panel, being aware that the Minister for Health and Social Services had responsibility for the allocation of licences went on to ask:

The Deputy of St. Mary :

"Okay, so we have a situation where the Minister for Health and Social Services is responsible for issuing the licence but the department (EDTSC) is responsible for the mechanics of operation and the regulation?..."[60]

The Minister for Economic Development, Tourism, Sport and Culture:

"So the agricultural regulation, if you like, falls within our remit. I am not sure if there is a crossover, what crossover with the Environment Departmentthe Minister for Health and Social Services has responsibility for the control of medicines and misuse of drugs, et cetera..." [61]

The Panel went on to ask the Minister for EDTSC what role the Minister for the Environment had to play within the industry and asked what discussions, if any, had taken place over the production of medicinal cannabis. The Minister responded:

The Minister for Economic Development, Tourism, Sport and Culture:

"Well, we have not really had any detailed discussions over the process of production or really cultivation, extraction and manufacture. Conversations between the Minister for Health and Social Services and the Minister for the Environment are based around the planning issues, planning challenges, and really the conversations have just confirmed that we agree. Having said that, I think that the Minister for Planning is mindful of the potential impacts, especially the aesthetic impacts on the countryside, so I understand that the planning authorities are perhaps considering whether that needs to be looked at also the majority of the activity carried out by these operations are agricultural, and there could be questions as to whether this goes over into light industry"[62]

This response from the Minister for EDTSC is further indication that there seems to be a lack of alignment with working between Departments. It is clear that more than one Department needs to be involved in the medicinal cannabis industry, and without collaborations there may be a danger of key areas being overlooked. In addition, the Panel's advisers were keen to point out the importance of synergies between Departments and stated that:

"In order to facilitate and support industries that want to do business in Jersey, it is strongly recommended that synergies are developed between the Minister for Health and Social Services, the Minister for Economic Development, Tourism, Sport and Culture, and the Minister for the Environment to devise an adequate assessment framework on the environment impact that would at the same time protect and safeguard the interests of third parties and all. It is strongly recommended for any conditions and requirements forming part of the said assessment to be rendered clearly and in a transparent manner before licences are granted"[63]

During the Public Hearing with the Minister for the Environment, the Panel was informed by the Minister that he had had very little involvement regarding the medicinal cannabis industry. When questioned around his involvement, it was clear the Minister had played little part in creation and promotion of the industry and the degree of consultation that had taken place. The Minister also informed the Panel that any exposure he had had with the regulatory side of the industry had arisen as a result of the views expressed by members of the public.

The Deputy of St Mary:

"Can I simply ask the basic question as to your role, Minister, in the creation or the promotion of this industry and the degree of consultation that is taking place with your department?

The Minister for the Environment:

To be frank, very little. I am certainly aware, having been present at the Council of Ministers' meeting when there was, if you like, a strategic proposal coming forward from the Deputy Chief Minister and his team about the potential that exists for medicinal cannabis. I think that was an issue, I believe, entirely focused on what you might call the business aspect of the matter. As Minister, I think the exposure I have had too with regulatory has basically arisen as a result of views expressed by members of the public and other States Members, who have raised quite a number of very challenging questions about the impact of this industry"[64]

The Minister also informed the Panel he believed "we are on a learning curve and, therefore, I am discussing this regularly with my team"[65]

The role of the Minister for the Environment was in contrast to that of the Minister for Health and Social Services who was clear of his role in the industry and was able to give the Panel a complete overview  as  to  why  the  Department  of  Health  and  Social  Services,  together  with  the  Chief Pharmacist, was involved:

The Minister for Health and Social Services:

"The Minister for Health and Social Services is responsible for the licensing of any cannabis cultivation and production, and generally the use of any cannabis plants grown in the Island. That authority given to the Minister to licence arises out of the provisions of the Misuse of Drugs (Jersey) Law, which is 1971 or something like that. It is an old piece of legislation. I do not think it envisaged the sort of uses for licensing that are now being seen but nevertheless that is the structure that is in place. The Chief Pharmacist also has statutory duties under that legislation. Where a cannabis product is to be refined into a medicine in Jersey then a licence needs to be obtained under the Medicines (Jersey) Law, which of course also then involves me and the Chief Pharmacist. That is just a brief background to the reasons why the Minister for Health and Social Services is involved"[66]

The Panel finds it alarming that there is no clear Ministerial responsibility for this industry. There are no boundaries as to responsibility and, in addition, some Departments have little or no involvement when it is clear they should be playing an extremely important role in the overall medicinal cannabis process. As noted above, a strong recommendation has been made by the Panel's advisers that synergies are developed between Departments which the Panel will recommend to the Council of Ministers as part of this report[67].

At its recent Public Hearing on 19th November, the Panel was made aware of work currently in progress to establish a Political Oversight Group (POG). The Panel was informed the POG would oversee process and evolve as the industry developed. This was new information for the Panel and whilst it had been aware of the Cannabis Co-ordination Group, a group made up of officers across different Departments, at the time of originally drafting this report and making the recommendation above, the POG did not exist. The Panel has since been informed the first meeting of the POG took place on 16th September 2021.

The Panel has agreed to leave the recommendation as drafted and looks forward to the Ministerial response in due course, where it is hoped more detail on the future of this group will be provided.

Internal Groups Involved in the Industry

During the course of the Panel's review, it became aware of various groups involved in the medicinal cannabis industry. During the drafting of this report, these were as follows:

• Jersey Cannabis Agency

• Jersey Cannabis Advisory Group (now cannabis trade body)

• Cannabis Co-ordination Group

• Cannabis trade body

Jersey Cannabis Agency

The Jersey Cannabis Agency (JCA) is the named body on the MoU with the UK Home Office. It is the body responsible for the issuance of licences under the MoU and is made up solely of the Minister for Health and Social Services.

A written question on the formation of the JCA was presented on 8th February 2021 to the Minister for EDTSC by the Connétable of St Martin. The question asked for the JCA's respective Terms of Reference, details of any annual funding provided by the Government of Jersey, when and where any information on both the Agency (the JCA) and the Advisory Group will be made public and details of membership, where possible, including any Ministerial responsibilities that may have been assigned.

The Minister responded to the question stating

"The Jersey Cannabis Agency' is simply the licensing authority in respect of licenses to cultivate and is administered by the Chief Pharmacist. No Government funding is provided to the Jersey Cannabis Services Advisory Group. An Economic Development Framework for Cannabis Investment in Jersey is under development and which is anticipated to be completed in Q2 with an associated communication plan that will specify the roles and responsibilities of the various associated agencies. The Jersey Cannabis Agency is effectively the Health Minister under MOU with the UK Home Office"[68]

The full question and response can be found here.

At its Public Hearing with the Minister for EDTSC on 26th June 2021, the Panel raised the issue of the JCA's terms of reference with the Minister and was informed the terms of reference were, to a certain extent, the MoU.

Senator S.W. Pallett:

"The J.C.A., does that have formal terms of reference?

The Minister for Economic Development, Tourism, Sport and Culture: It is the MOU, is it not, to a certain extent?

Chief Pharmacist:

To a certain extent, the MOU provides the framework for the Jersey Cannabis Agency to exist. There are no specific terms of reference for the Jersey Cannabis Agency. It is guided by legislation in terms of what it can and cannot do"[69]

The Panel went on to ask if it might be worth considering widening the Terms of Reference and was informed:

Chief Pharmacist:

"Certainly, widening the (several inaudible words) but I think there is an acceptance that there needs to be a broader group to advise on licensing decisions and that group could (several inaudible words)"[70]

Expansion of the JCA Remit

The Panel's advisers have stated that "the JCA advisery group, even if totally non-executive, is a step in the right direction."[71] However, they have also pointed out the importance of having other representatives on the JCA and have recommended an expansion in its remit to include the monitoring  function  of  the  industry. This  would  include  compliance  with  security,  quality  of production, clear moral conduct of people working in the industry and issuance of trade licences. The monitoring function would also include ensuring Customs and Excise and the States of Jersey Police are well informed about the process of the medicinal cannabis industry and are trained to be attentive to illicit drug importation and possession. The JCA could also act as the focal point for the international promotion of the sector. Rules governing the set-up, governance and operations of the JCA should be established and the JCA should have sufficient internal controls to adopt a system of checks and balances with regards to decision making.

Jersey Cannabis Advisory Group

The Panel advisers asked a series of questions of the Minister for EDTSC in relation to this group and asked:

• What is the role of the Jersey Cannabis Services Advisory Group (JCSAG)?

• Who does it report to?

• What is the background of its members and what function does it seek to occupy?

• Does it have any oversight with respect to the licencing process? If yes, please elaborate.

The response received was as follows:

"The purpose of the JCSAG is to provide an industry perspective on what is required. It is evolving as the industry develops. A meeting is being scheduled for the purpose of identifying membership of the group going forward"[72]

The response also confirmed the JCSAG had no oversight with respect to the medicinal cannabis licensing process. At the time of drafting this report, the Panel was informed the JCSAG is in fact the newly formed Cannabis Trade Body (CTB) which is discussed at the end of this section.

Cannabis Co-ordination Group

The Panel became aware of the Cannabis Co-ordination Group (CCG) during its Public Hearing with the Minister for EDTSC on 21st June 2021 and was informed the group is made up of officers from various departments. The Panel was also informed via correspondence, that the group has no Terms of Reference as it is simply an informal grouping of officers who may have some involvement in various aspects of the project and whose task it is to meet once a month to coordinate activity across Government Departments. The Panel was given some background to the group by the Group Director of Economy at its Hearing with the Minister for EDTSC.

Group Director, Economy:

"Because, as we are discussing this afternoon, this is a multi-disciplinary sort of Jersey PLC (public limited company) type challenge. We have all got to kind of work together like officers, politicians or external companies to support this. It does require some co-ordination and working outside of silos. The group is an internal officer group but that joins the dots as far as is possible in what is a formative process. That has allowed us to get to where we are today and I take your point about political oversight, well made. But the officer group, I think, has worked really well. I think it has had 27 meetings in its lifetime, meets once a month and it  is  entirely  an  officer  group  that  applied  that,  just  to  make  sure  that  the  economic development imperative is not lost in discussions around regulation"[73]

At the same Public Hearing, the Panel asked if minutes of meetings from the Cannabis Co-ordination Group would be available for review and was informed these were available and the Panel was welcome to see them. The Panel has asked for these and at the time of drafting this report, had received them, however, in a heavily redacted format. The Panel has since asked for unredacted versions to hopefully better inform it as to the direction of travel for the medicinal cannabis industry.  

The Panel is encouraged that a group of cross departmental officers are working in coordination however, believes it would be beneficial to the Island's medicinal cannabis industry if this group were more transparent, published their findings and made the Public aware of how the medicinal cannabis industry was moving forward.

Cannabis Trade Body

In August 2021, the Panel was informed via a media announcement that a new government-backed cannabis trade organisation, recognised by the Government, had been launched in what was described as a landmark development' for the emerging industry.[74]

The media article went on to say

"the Cannabis Services Advisory Board will hold monthly meetings between businesses, lawmakers and other interested parties. It will seek to work with the government on business development and regulation issues. Board members include medical cannabis cultivation business Northern Leaf and cannabis production company Cicada, both of which are Jersey- based, as well as cannabinoids business Tenacious Labs, which has offices in London and Miami".

The Panel is not aware of the operation of the Cannabis Trade Body or its structure, and has written to the Minister asking for further details. The Panel's letter can be viewed here.

The Panel received a response from the Minister on 10th September and whilst the Cannabis Trade Body is viewed as an individual entity, the Panel is concerned it may not be independent enough' to provide impartial advice to Government, especially as each of the members are involved directly in the medicinal cannabis industry and are "interested parties wishing to develop this new sector of the economy"[75] Although the Panel and its advisers view the formation of the JCAG and the CCG as positive recent steps, it still raises concern that there does not seem to be a defined structure of responsibility for the medicinal cannabis industry with no overall Ministerial accountability. The Panel considers it necessary that a structure chart is put in place with clear lines of communication for each of the groups advising the relevant Minister. The Panel also firmly believe there should be one Minister with overall responsibility for the industry with the various groups clearly defined with Terms of Reference and objectives.

9. Economic Impact

Potential Economic Impact to Jersey's Economy

The Panel was informed at its Public Hearing with the Minister for the EDTSC that in the UK, the value of sales in the medicinal cannabis industry was close to £700 million just last year alone however, the Panel is not aware what percentage of this went to the UK Treasury. The Panel advisers informed within their report that "the legalisation of cannabis for medical purposes has the potential to make a significant contribution to Jersey's economy. These benefits take the form of employment creation, the generation of tax revenues, and value added; the latter being the sum of the wages and profits that would be generated by the industry."[76]

Within their report, the advisers present high-level estimates of the potential economic impact of the industry over the short-to-medium term. The estimates presented are based on the agricultural land that has been earmarked for the cultivation of medical cannabis and a set of industry-specific indicators that are based on information obtained from a sample of companies operating in the industry in other countries.[77]

These are broken down in the adviser's report under the following 5 headings:

• Space Requirements

• Employment

• Wages and Salaries

• Taxation

• Value Added

Each of these topics is discussed in more detail in this section of the Panel's report however, a more comprehensive analysis can be found in the adviser's report which is attached as Appendix 5.

Space Requirements

Jersey is an Island 9 miles by 5 miles and it is widely known that development space in Jersey is at a premium. During its Public Hearing with the Minister for EDTSC, the Panel was informed that the total area of land that has been allocated, or is earmarked to be allocated, for the cultivation for medical cannabis in Jersey amounts to 7.9 hectares. The Panel's Terms of Reference did not cover it researching space requirements in more detail however, as mentioned previously, the Panel has been liaising with the EHI Scrutiny Panel who may undertake additional scrutiny into the planning and environmental impacts of the medicinal cannabis industry and this is something the Panel will raise with the EHI Scrutiny Panel in due course.

Employment

Part of the economic impact to Jersey would be the employment sector and how much revenue this would generate to the Island. This was raised by the Panel at its Public Hearing with the Minister for EDTSC where it asked if there was any indication of the value of jobs the industry would create. The Panel was informed there was a range of high value technical jobs in addition to lower valued jobs, however, the Department could not provide any actual detail. It was estimated that in their view, a facility would need about 50 people. This was based on speculative conversations held between the Group Director, Economy and an investment company in Southern Europe which was

looking at approximately 50 staff with an annual salary bill of £1.9 million per year. It was further explained to the Panel that this is a really, really, potentially, lucrative and beneficial initiative for the Island'.

Group Director, Economy:

"Yes, we do not have the actual detail but there is obviously a range of high-value technical jobs and lower-value jobs. A facility, in my view, means about 50 people. One of the speculative conversations we have with a company that (inaudible) with investment company from southern Europe was looking at approximately 50 staff where they bill an annual salary of about £1.9 million a year.

Then if you look at that at 2 per cent inflation over the next 20 years, which is the length of their business, so long-term investment. But I did not think about £47 million creates a lot of if that is the income tax receipts coming from that. But there is also construction costs that better be and better fixed around banking and administration, as well as the industry itself. This is a really, really, potentially, lucrative and beneficial initiative for the Island"[78]

The Panel was informed by its advisers that the number of jobs generated by a medical cannabis licence holder would depend heavily on its business model as some companies would engage in cultivation only, others engage in production only, while others would engage in both. Different positions are required in different stages of the production process each having their own responsibilities and corresponding salaries. The Panel therefore found it difficult to understand how the number of approximately 50 staff per facility, even as an estimate, could be so easily arrived at without an understanding of what the company would produce.

The Panel's advisers briefly described the human resource requirements in the different stages of the production process as follows:

The Cultivation Stage  

The cultivation stage of the production process includes the plantation and nourishing of the cannabis plant. The employees are responsible for maintaining the proper environment required to grow the cannabis plant in terms of lighting, chemicals and so on. The cultivation process is managed by the master grower who is directly responsible for managing all operations and employees falling under the cultivation process to be able to deliver the flower onto the next stage of the production process.

The Extraction and Laboratory Testing Stage  

The extraction and laboratory testing stage of the production process entails all operations required to process the cannabis flower into the medicinal product. An extractor is responsible to convert the marijuana trimmings/flower into concentrates required to make the medicinal product. The concentrates are packaged and sold or infused into edibles. Proper ventilations systems in laboratories as well as monitoring over operations is vital. The extraction and testing stage is directly managed by the master extractor who is responsible for the overseeing of all functions in the production facility.

The Dispensary Stage of the Production Process  

The dispensary stage of the production process entails the selling of the finished cannabis product to patients or consumers. Various types of employment opportunities are presented in this final stage of the process which range from overseeing all the administrative operations in the dispensing facility, handling inventory, delivering to dispensing units (such as pharmacies), upkeeping, recording of transactions and marketing of the finalised cannabis product.[79]

The Panel's advisers have estimated that the industry has the potential to employ anything between 40 and 50 employees in the immediate term, increasing to 160-180 employees in the medium-term, and growing to 330-360 employees in the long-term.

"Expert knowledge of the industry suggests that a company engaged in both the cultivation and extraction stages of the production process of medicinal cannabis products employs individuals for cultivation and the production process in the ratio 1:3. We complement this information with Key Performance Indicators (KPIs) for the international medical cannabis industry to gauge the economic impact that the industry may have on Jersey's economy. On this basis, we estimate that the industry has the potential to employ anything between 40 and 50 employees in the immediate term, increasing to 160-180 employees in the medium- term, and growing to 330-360 employees in the long-term"[80]

Wages and Salaries

The Panel's advisers highlight:

Market research shows that senior management in the medical cannabis industry could earn anything between £55,000 and £145,000 per annum; general management could earn £36,000 to £50,000 per annum; and labourers could earn £22,000 to £30,000 per annum. Thus, indicative estimates suggest that in the short-term, the industry could generate as much as £1.3 million in wages and salaries. This may increase to £4.8 million per annum by 2023; and may increase further to £9.7 million per annum beyond 2023 if employment increases to around 350 in the long-term. Whilst the Panel is encouraged by these figures, further research by the Panel advisers state that it is likely tax intake to the Island through employment will be close to zero in the first few years. This is discussed in more detail in the taxation section of this report.[81]

Although it is encouraging for the advisers to give these estimates, further research by the Panel advisers also indicates that if Jersey opts for a 20% tax rate on companies' profits, tax revenues from such activity will be minimal for several years from the date of licence registration. This is discussed in more detail later in this report.

Taxation

During its Public Hearing with the Minister for EDTSC, it was reported that tax revenues are expected to amount to around £4.9 million per hectare; based on a 20% tax rate on company profits. On the basis of the information presented to the Panel and its advisers, this would translate into £4.4 million in tax revenues in the short-term; £19.1 million in the medium-term; and £38.7 million in the long- term.

This is covered in more detail in the taxation section of this report.

Value Added

The Panel's advisers wrote within their report that the contribution of the medicinal cannabis industry to the Jersey economy is ideally measured by its contribution to its Gross Domestic Product (GDP). "In its simplest form, this may be measured as the sum of wages and profits generated by the industry.

It should be noted that the accounting losses that would be registered by a typical medicinal cannabis company in the early years of operation imply that the industry's contribution to Jersey's GDP through wages would be partly offset by the accounting losses registered by the companies operating in the industry. Thus, in its infancy, the medical cannabis industry's contribution to the Jersey economy should not be expected to exceed wage estimates presented in the table on the previous page"[82]

Economic Framework

The Panel understands that the Council of Ministers has endorsed an economic framework for the medicinal cannabis industry on the Island. Within the response to a written question submitted by the Connétable of St Martin on 8th February, the Minister for EDTSC stated that "an Economic Development  Framework  for  Cannabis  Investment  in  Jersey  is  under  development  which  is anticipated to be completed in Q2 with an associated communication plan that will specify the roles and responsibilities of the various associated agencies."[83]

The Panel, at its Public Hearing with the Minister for EDTSC asked for an update to the Economic Framework and was informed that Part 1 was to achieve the MoU (which had been completed) with Part 2 being the Amendment to the Proceeds of Crime Law. At the time of drafting this report, the Amendment to the Proceeds of Crime Law had been approved and is discussed in more detail later in this report. Part 3 of the Economic Framework involved research and development and the Panel

was informed that this was currently being determined and discussed. The Panel was informed updates would be communicated to it once the situation became clearer.

Senator S.W. Pallett:

"So once that gets through you will start to communicate to us about how that is going? Group Director, Economy:

Exactly. So it has been quite difficult to be really clear about what the situation is until the situation has been landed, effectively"[84]

At the time of drafting this report, the Panel had not received an update on the Economic Framework however, it would continue to monitor the situation and if necessary, following completion of this review, would include it as an ongoing area of questioning at its Public Hearings with the Minister, held each quarter.

Economic Impact Assessments of Applicants

As previously mentioned in this report, the Panel was informed that the Minister for EDTSC has responsibility for the economic and business aspect of the medicinal cannabis industry. It was important for the Panel to understand the economic impact to the Island, be it positive or negative, and to review the steps which had been undertaken by the Minister to arrive at the conclusion and economic predictions.

At its hearing with the Minister for EDTSC, the Panel asked how the commercial viability and feasibility of applicants was assessed and by whom. It was informed that this was part of the work of the Department of Economic Development who undertake research through various entities to ascertain the scale and size of the market.

Group Director, Economy:

"So, we do a lot of research through various entities to ascertain the scale and size of the market, so BDS Analytics, Arcview, Prohibition Partners, to name but a few, but also we work quite closely with applicants who after all are investing private money and generating investment from third parties to drive this forward"[85]

The Group Director of Economy went on to say that some of the details within the medicinal cannabis licence application are speculative around how the applicant would access the market and take advantage of it. However, medicinal cannabis licence applications include detail around the business plan and activities which are then reviewed by the Department of Economic Development to gain an understanding of the fiscal receipts which may be received from the organisation.

Group Director, Economy

"What is in the application is really a speculation around how those companies are going to access that market and take advantage of it. Within those applications are quite a lot of detail around their business plan and their activities, which we review and, therefore, get an indication of the fiscal receipts that we might receive from that organisation"[86]

The Group Director of Economy explained that the Council of Ministers have endorsed an investment framework for cannabis which involved the Island having the ability to have its own cannabis agency to issue commercial licences to cultivate and sell products.

Group Director, Economy:

"the investment framework endorsed by the Council of Ministers involves the Island having the ability to have its own cannabis agency to issue effectively commercial licences to cultivate and sell products. The reason it was important to Jersey from an economic development perspective to have its own cannabis agency is that as long as our parent regulator is content that we are, i.e. the U.K. Home Office, working against the necessary convention that all other advice that we may receive from them is optional and we can actually overlay our own policies around the development of this sector from an economic development perspective as we see fit where we see the market opportunities"[87]

The Group Director of Economy also informed the Panel that, from an economic development perspective, the framework in place is the minimum required to create conditions for commercial operators and private sector individuals to make investments on the basis of their own due diligence. The Panel to date has not seen the detail of any such investment framework.

Group Director, Economy:

"Our job, in my view, is to create the best conditions for success, and what we do have and what the Council of Ministers has endorsed is an investment framework for cannabis"[88]

The Panel was keen to make the connection between how the economic impact of a medicinal cannabis licence application could influence the decision to grant a licence and, recalling that the medicinal cannabis licences were ultimately granted by the Department of Health and Social Services, the Panel was keen to understand where the Department of Economic Development provided input during this process. The Panel asked the Group Director of Economy to what extent the Department of Economic Development would be involved in the licence application and decision- making process.

The Deputy of St. Mary :

"before we move on to other sections, the basic situation is that the licence is granted by the Chief Pharmacist/Medical Officer of Health, (sic) but to what extent in determining whether that licence should be granted does commercial viability play a part in all the decision-making? Do you give input at that stage?

Group Director, Economy:

"So I would not speak to the regulator directly and say: "I do not think this is commercial" or: "I do think it is commercial." What we would rely on is the private sector to determine that for itself. It has the framework to make those investments and, of course, all investments in businesses are to some extent speculative"[89]

This concerned the Panel as it seemed the Group Director of Economy was informing it that they didn't fully scrutinise each medicinal cannabis licence application for its economic impact to the Island and relied on the private sector investors.

The Group Director of Economy explained that what they found useful was to look at the costs of investment and the potential output from those investments and what it means in terms of market access and what it means for fiscal receipts in terms of tax. He went on to say that the detailed costs in the applications that are reviewed are sense checked and the Department work with an industry body that advised them on the sort of activity which is being undertaken.

Group Director, Economy:

"The other thing we do is we work with an industry body that advises us on this sort of activity, but ultimately this is people saying: "We have an opportunity in Jersey, unlike many other places in the world, to invest in this market early because of the framework that the Island has established in terms of investment." But we are not going to say to somebody: "You cannot have a licence from an economic development perspective because we have not seen your business plan." That is not what we do"[90]

The Panel was again concerned that there did not seem to be any rigorous checks and balances in place to understand the full economic impact of each medicinal cannabis licence application. In addition, it soon became clear that the Department of Economic Development, whilst being involved in the commercial viability the industry as a whole, played no part in the initial granting of medicinal cannabis licences.

The Deputy of St. Mary :

"But at the time of the application for the licence, to what extent are you involved in that individual licence?

Group Director, Economy:

Directly in terms of the licensing decision, not at all"[91]

The Group Director of Economy explained the reasoning for this was that, with the presence of the Jersey Cannabis Agency through the Minister for Health and Social Services issuing licences, this allowed the economic sector to be broadened to allow the Economic Development Department to take a larger view of the benefits to the Island.

The Panel went on to ask if the opportunities for Jersey in the medicinal cannabis industry had been assessed internationally and how the Island could benefit and possibly improve on what has been tried elsewhere. The Panel was informed that the Department worked closely with the  two companies that currently held licences in Jersey and in addition, had knowledge of where the key markets were globally. The Panel was further informed that it was important not to underestimate the importance of the day to day work undertaken with the current licence holders who were constantly looking at the market and how it could be accessed. It was further explained that through working closely with the licence holders, the Department could gain privileged information which allowed it to get access to commercial realities, who the key movers in the market were and where and how fast the industry was growing.

Group Director, Economy:

"We understand very, very well, through conversations and through privileged information about their commercial realities, where they are aiming and the key markets are in Europe because it is where the key growth in this market is"[92]

Investment

Another key area of economic impact to the Island the Panel reviewed was inward investment and how much funding this would generate. The Panel asked for some insight into how successful inward investment had been to date in relation to the cultivation side of the medicinal cannabis industry and how much interest there currently was in the sector. An amendment to the Proceeds of Crime Law was approved by the States Assembly in late June 2021 which made it legal for proceeds gained by the medicinal cannabis industry not to be treated as proceeds of criminal conduct if they are generated from jurisdictions where production of medicinal cannabis is lawful. It was explained by the Group Director of Economy that the approval of this amendment was an important aspect in the Island being able to move forward and make Jersey's position absolutely clear for those wishing to invest in this sector. The amendment to this law is discussed in more detail later in this report.

The Group Director of Economy was keen to point out that the enquiries received from investors included relocations to the Island and touched on the interest in businesses wishing to headquarter their Jersey and Guernsey companies together.

Group Director, Economy:

"Most recently we have seen quite a significant producer in Europe come into Jersey wanting to relocate their company in the Island, where there was previously a 20 to 25-year investment plan. As I say, it is a relatively new development and we also have got a number of funds across locally both Jersey and Guernsey in terms of headquartering their companies together, where they see all the benefits they make in the standard terms of the companies that we want to get behind with individuals that we want to encourage into the Island"[93]

The Group Director of Economy went on to inform the Panel of the external investment the two current licence holders were currently making stating:

Group Director, Economy:

"We have got a lot of interest in people wanting to come here and base themselves as cultivators. The 2 companies that have currently got licences are putting in all sorts of external investment as well. I think the reality is that there is a supply and demand issue in Europe and we are very close to being the first to market. I think people in the world recognise that"[94]

The Panel will monitor the inward investment aspect of this industry extremely closely and will ensure the Minister for EDTSC is held to account either through its quarterly Public Hearings or via correspondence.

10. Tax Implications

Update to Finance (Jersey) Law

As previously mentioned in this report, the Panel is concerned there are no approved regulations specific to Jersey and reliance is on a MoU between the Government of Jersey and the UK Home Office. In its letter to the Minister for EDTSC on 23rd April, the Panel asked what regulations he would be proposing to bring forward in the future. The Minister responded on 7th May stating the focus was currently on income tax regulations being brought by the Minister for Treasury and Resources which it was hoped would be drafted over the summer months. The Minister went on to inform the Panel that the regulations would need to be in force by 1st January 2022.

The Panel asked the Department of Treasury and Resources if it could receive a briefing in relation to these income tax regulations. The Panel was informed that the Regulations currently being drafted were to introduce taxation of the cannabis industry and would be stand-alone legislation. At the time of its request for a briefing, the Minister did not yet have a draft of the Regulations to share with the Panel and was further informed that:

"there is ongoing discussion about policy issues with colleagues in the cross-government cannabis coordination group. Once the policy issues are resolved, law drafters will be in a position to finalise a first draft of the Regulations"[95]

The Panel also asked the Minister for Treasury and Resources in written correspondence on 25th June if it could be advised when the legislation for the taxation of medicinal cannabis growing and processing was intended to be brought forward. The Minister responded on 2nd July stating these would be lodged before the end of August to bring them into force for the year of assessment 2022 (i.e. from 1 January 2022).

Minister for Treasury and Resources:

"Officers within Revenue Jersey are members of the cross-government Cannabis Coordination Group, who meet regularly to discuss issues related to the cannabis industry. More recent discussions have included the scope of the charge to tax for the cannabis industry. As part of its role in the governance of key tax policies, the Revenue Policy Development Board (RPDB) decided earlier this year that the profits of the cannabis industry should be taxed at the rate of 20% and that normal business tax principles should apply. The Regulations to tax the cannabis industry are currently being drafted and officers are working closely with colleagues in the Cannabis Co-ordination Group to ensure the tax 2 treatment is in line with latest thinking and policy considerations. I expect to lodge the Regulations before the end of August and bring them into force for the year of assessment 2022 (i.e. from 1 January 2022)"[96]

The Panel received the draft regulations on 1st October 2021 during the final stages of drafting its report. The Panel has not yet had the opportunity to review the regulations in any detail and detailed reference to them is therefore not made within this report. The Panel reviewed the regulation and drafted a comments paper which was presented to the States Assembly on 16th November 2021, prior to the debate.

Proceeds of Crime Amendment

On 17th May 2021, the Minister for External Relations and Financial Services lodged Draft Proceeds of Crime (Amendment of Law) (No.2) (Jersey) Regulations P.45/2021. The amendments made to the Proceeds of Crime (Jersey) Law by this particular amendment were designed to enhance the attractiveness of Jersey as a jurisdiction in which to carry out investment and management of cannabis related activities where the cultivation of cannabis is legal and have appropriate global financial regulatory standards. However, it is to be noted that such amendments were aimed at allowing entities lawfully engaged in medicinal cannabis in some form from conducting business arrangements in Jersey and were not relevant to actual production in the Island.

The Panel issued comments to the amendment as it considered it would be helpful, given its acquired knowledge and ongoing work, to contribute to this matter and in doing so re-assure Members and interested parties that the implementation of these amendments bore no impact on its ongoing review and its current Terms of Reference.

During its Public Hearing with the Minister for EDTSC, the Amendment to the Law was discussed with the Group Director of Economy who informed the Panel that the amendment set out to give a strong message to those entities that wished to invest. The Group Director went on to say there was a financial imperative to make sure that the process of investment was highly regulated with a high bar to entry, so that those who did end up investing, would be above board and the process is absolutely transparent.

Group Director, Economy:

"It is a little bit delicate with not the Minister responsible here but the reality is the proceeds of crime legislation will, effectively, have a list of jurisdictions where we feel the risk of corruption and anti-money laundering and so on and so forth, which will all impacts on reputation, it will be illegal to engage with them in this space; that is the safety net around reputation. We also believe that those people that want to invest in this space are absolutely as concerned about reputation as we are because lack of reputation in this space for all the reasons that you have said, that is your devalue to their companies"[97]

Having undertaken Scrutiny of this amendment and presented comments, the Panel is content the purpose of the amendment was to clarify which investments should not be treated as proceeds of crime by local Financial Services Businesses. It was the Panel's understanding that the amendment, would ease the situation for legitimate local financial services businesses looking to invest in the medicinal cannabis sector. The Panel also considered the amendment and its review as two separate issues and stated within its comments it was satisfied the amendment would not impact on its ongoing review and final report.

The Panel would like to see a similar stance taken as that undertaken with the Proceeds of Crime amendment with regards to the exportation of cannabis off Island. This would involve no cannabis being allowed to be exported without the medicinal cannabis licence holder having EU/GMP accreditation. The importance of this accreditation is mentioned throughout this report and involves rigorous testing of the product to ensure that not only the product, but the company is compliant with strict EU regulations. The Panel cannot stress enough the importance of exporters obtaining this accreditation and considers this is paramount if the Island is to retain its high standard of reputation.

Tax Intake to the Island

Throughout the course of its review and evidence gathering, the Panel came upon material, both anecdotal and factual, regarding the medicinal cannabis industry as being profitable. The Panel was keen to understand where the profitable areas were, if any, and one of the key areas discussed was the future tax intake to the Island as a result of the industry's success.

The Group Director of Economy, as previously mentioned in this report, informed the Panel that in the UK, the value of sales in medicinal cannabis was close to £700 million in the last year alone. The Panel, although pleased to hear there was such a profitable industry looking to be developed in Jersey, was still unclear how this would transfer into profit for the Island. The Panel asked what the expected fiscal receipts would be and if the Department had any numbers on the amount of money coming into the Exchequer from the industry. At its recent Hearing with the Minister for EDTSC, it was informed that fiscal receipts would be expected from possibly 2023 but more likely 2024 with an estimate of £4 million in tax receipts.

The Minister for Economic Development, Tourism, Sport and Culture:

"Yes, treasury have been working with ... it is difficult to quantify that because we do not know how the market (several inaudible words) the Government Plan, which was ... I think we are expecting to see receipts from possibly 2023 but more likely 2024. I think it is estimated that we could receive £4 million in tax receipts, and that is just pure tax receipts. I will be corrected by an officer if I have that figure wrong, because we are planning to ... the proposal, I understand, will be to introduce a corporation tax of 20 per cent on the profits of businesses licensed ... for licensed businesses"[98]

The Panel also asked if there would be any exemptions for the cannabis industry in the tax regime at all and was informed:

The Minister for Economic Development, Tourism, Sport and Culture: "Not that I am aware of"[99]

The Panel raised the question of offsetting expenditure on set up costs against profits to try to gain more understanding of where the profit margin was.

The Deputy of St. Martin :

"But will these companies be allowed to offset their expenditure on set-up costs against profit?

The Minister for Economic Development, Tourism, Sport and Culture:

One of the reasons why the receipts are unlikely to be seen until 2024 is because, yes, the company can ... as I understand it, there are large set-up costs so I think that has to be taken into account. I think one of the conversations was around perhaps looking at a turnover tax as opposed to a tax on profits because that would deliver yields to the treasury sooner rather than later..."[100]

The Group Director of Economy provided further clarification on anticipated tax take and stated that:

"We guesstimate the current value about £3,000 to £4,000 a kilogram in States market prices and that is relatively conservative. But looking at the amount of hectarage at the moment, we are anticipating a tax at 20 per cent to generate about £4.9 million per hectare"[101]

This is touched on earlier in the section of Space Requirements in this report however, the Panel was informed this was based on having 0.9 hectares at the moment in Phase One, and Phase Two would increase to approximately three hectares over the next two to three years. The Panel was informed that that in itself will generate about £15 million per year in revenue[102].

In addition, the Panel was also informed that credible licence applications in the pipeline would represent a potential further 4 hectares.

Group Director, Economy:

"So if that comes to fruition and, of course, there are some hurdles externally to jump through, so GMP accreditation and so on and so forth, but if that does reach fruition - and, of course, coming back to the point, this is about us creating the conditions for these businesses to be successful - you are looking at potentially 7 or 8 hectares, around £30 million per annum in terms of fiscal receipts. Going back to the tax, yes, it is based on ordinary business principles as the tax terminology and it will be 20 per cent and you will get all the capital allowances that you would expect under the normal circumstances"[103]

Although the Panel was pleased to understand in which area the Department believed the fiscal receipts were due and was grateful to receive an overview, it was extremely concerned that these figures were based on overcoming a lot of challenges and could be considered speculative. The industry is very much in its infant stages and the Panel is of the opinion the fiscal receipts relied on the conditions for the medicinal cannabis industry being overall successful.

The Panel's advisers were extremely thorough in their report on the impact of taxation. This section of the report was carried out by Grant Thornton in Jersey (GTJ) who have a wealth of knowledge in this area. The Panel did not invite the Minister for Treasury and Resources to its Public Hearings instead relying on GTJ to provide an analysis using the information received from the Department of EDTSC against the current tax system in Jersey.

The following section is a brief overview of their findings with a more comprehensive view within their report.

It should be recognised that the business model of medicinal cannabis companies generally requires that they invest heavily in the early years of the business. Consequently, a typical medicinal cannabis company does not register any accounting profits in its early years of operation. This is true for many established multinational medicinal cannabis companies. Therefore, if Jersey opts for a 20% tax rate on companies' profits, tax revenues from such activity will be minimal for several years from the date of license registration. For this reason, Jersey may wish to consider other tax bases. The Panel finds this information concerning and cannot see any profit being made within the industry in the short term.

The advisers informed the Panel one area of alternative tax would be to impose a turnover tax' or a licence charge which is directly commensurate to the medicinal cannabis companies' turnover. They went on to say that this has the advantage of enabling the Government of Jersey to earn tax revenues immediately upon a medical cannabis company's initiation of sales or exports. Like a tax on profits, it also has the advantage that the tax authority can easily obtain information about the tax base from companies' financial statements. At the sametime, different European legislative systems may incentivise entities to engage in transfer pricing or other tax avoidance strategies that would enable them to minimise their tax bill.

The advisers went on to recommend additional alternative tax intake initiatives which can be viewed in more detail within the adviser's report.

Employment Taxation

Jersey currently has two bases upon which to calculate personal income tax. The first method is to give personal allowances and tax at the rate of 26%, the second is to calculate tax broadly at 20%. The taxpayer enjoys the lower of the two calculations. There is the possibility that revenue will be raised for the island through indirect taxation (employment taxes etc.) and even at the higher end of the projected salary scale, all employees are likely to fall within the bracket of receiving personal allowances and paying tax on the remaining balance at 26%.

In the report produced by Statistics Jersey –February 2019 entitled "estimating government receipts and expenditure for Jersey households"  it was estimated that in order for established Jersey residents to make a net contribution to Government revenues then their income would need to be in excess of:

• Single Adult £28,000;

• Married couple –one working £38,000;

• Married couple –one working –two children  £110,000.

The Panel's advisers have informed it that based on these projections, they would suggest that industry would not make a positive impact through personal taxation. The advisers go on to say that "the  current  labour  market  statistics  (Statistics  Jersey)  do  not  show  significant  levels  of unemployment 1.6% (c1,000) out of a workforce estimated to be 60,000. This should be contrasted to the advertised jobs at gov.je of 939 vacancies as at 21 July 2021. It is unlikely therefore that any revenue generated from taxation from persons employed with the industry will represent new taxation unless staff are recruited from outside the island (directly or indirectly)"[104]

Corporate Taxation

It was relayed to the Panel through correspondence and Public Hearings that the profits of the medicinal cannabis industry were being proposed to be taxed at 20%.

The Minister for EDTSC:

"The 20 per cent rate is automatically in my thinking. That would be a fair rate. Jersey is leading the U.K. and leading the world in some instances in this sector by having a very highly regulated and controlled space from which to operate in. We want to go with quality, very high-quality production, extraction, manufacture, export, rather than quantity. 20 per cent is a competitive rate."[105]

As stated above the business model of medicinal cannabis companies generally requires that they invest heavily in the early years of the business. As a consequence, a typical medicinal cannabis company does not register any accounting (or taxable) profits in the early years of operation. If the intention of the Revenue Policy Development Board (RPDB) is to treat a medicinal cannabis company like any other trading company then their taxable profits will be reduced through numerous business expenses, for example, interest (if funded from overseas the net recipient of the interest will not be taxable in Jersey), management charges, both domestically and overseas, repairs to buildings/ infrastructure, capital allowances in relation to investment in equipment etc.

It should be noted that any losses that are incurred in the initial years of trading are available to be carried forward and therefore we would not expect any taxable profits to be generated in the short to medium term.[106]

Indirect Taxation

At the present time it would appear that the cultivation and supply of medicinal cannabis would not be exempt under Schedule 5 of the Goods and Services Tax (Jersey) Law 2007. Therefore, under basic principle, any medicinal cannabis company would be required to register as it is likely that their turnover would exceed the registration threshold currently set at £300,000. However, it is noted that virtually all of the product would be exported from Jersey and as a consequence, be zero rated for GST purposes. The net result is that the company would be able to recover all GST that it has paid on any domestic supplies received (and capital cost relating to the business) without charging any GST on its exports. Therefore the industry would not provide any GST revenue to the island.[107]

Taxation on Profits

Within its letter to the Minister for Treasury and Resources on 25th June, the Panel asked various questions around the taxation of profits on medicinal cannabis in Jersey. The Panel began by querying the Government Plan 2022 – 2025 where it is stated that one of the measures to raise approximately £10m is the taxation of medicinal cannabis growing and processing', for example what percentage of the target £10m per annum in tax revenues will be made up of taxation of profits on medicinal cannabis growing and processing? The Minister responded stating it was not yet possible to forecast as the industry was in early stages.

Minister for Treasury and Resources:

"As you rightly say, taxation of the cannabis industry is included as one of the tax measures that has been forecast to help balance budgets by 2024. It is not yet possible to forecast how much tax will be raised from the taxation of the cannabis industry in Jersey. This is because the industry is in its very early stages and forecasts would be speculative. Even when those companies that are already licensed are fully operational, we do not expect them to be profitable straight away. Officers are reviewing the position as more information becomes available"[108]

The Panel also asked at what tax rate profits from the cannabis industry would be taxed and if there would be any exemptions and was informed that the Revenue Policy Development Board (RPDB) decided earlier this year that the profits of the cannabis industry should be taxed at the rate of 20% and that normal business tax principles should apply. Although this  has been discussed in information received from the Panel's advisers and during a Public Hearings with the Minister for EDTSC, the Panel felt it important to state it was also sourced during correspondence with the Minister for T&R.

11. Reputational Risk to Jersey

The Panel recognise that the legalisation of cannabis in some jurisdictions is a relatively new development and cannabis remains an illegal substance in a number of key global economies.1

The Panel is also aware, through anecdotal evidence received during the course of this review, that sections of Jersey's community are concerned about the reputational impact of medicinal cannabis cultivation on Jersey.

Consequently,  the  Panel believe  that on-Island  medicinal  cannabis  cultivation  presents  a reputational  risk  to  Jersey's existing core  industries.  In  their  report,  the  Panel  advisers  have recommended  that a  reputational  risk  assessment  is  undertaken, stating  that  it  should have a "particular focus on whether there is a risk of an adverse effect on the core industries that are significant contributors to Jersey's economy, such as agriculture and financial services. Care should be exercised to ensure that the island's other core industries are not prejudiced"

The Panel is not aware of a reputational risk assessment being undertaken and is in favour of this happening as soon as possible.

Cannabis: Medicinal vs Recreational

The Panel is keen to ensure that the cultivation of medicinal cannabis in Jersey operates within a strong regulatory framework, that promotes the consumption of medicinal cannabis and cannabis products for medicinal purposes only. The Panel's advisers stated in their report that, "It is very important that at political level the issues are not mixed up or confused. There is a risk that the more prominent  manufacturers  of  medical  cannabis  in  Europe  are  not  very  much  in  favour  of  an environment where cannabis for entertainment (non-medical) purposes is allowed."

The Panel believe that it is important to protect Jersey's good reputation. Clear distinctions need to be made at a political and operational level between acceptable medicinal cannabis and medicinal cannabis products, and unregulated and illegal recreational cannabis consumption. The Panel's advisers explained in their report that "Distinguishing cannabis products for recreational use from medical cannabis products and unregulated CBD oils will be important for law enforcement in many jurisdictions. The monitoring team should ensure compliance with the following:  

• Security Measures and Installations;  

• Quality of Production;  

• Clear moral conduct of people working in the sector; and  

• Trade licences."