Pharmaceutical, Foreign investment, Foreign trade

The new draft of Regulatory Decree for Medicinal Cannabis: Part 1 - Change to the general requirements of license applications

12/06/2019

The Colombian Ministry of Health has proposed a draft of Regulatory Decree on the Safe and Informed Access to the Use of Cannabis currently regulated by Decree 613 of 2017. The Draft, when it is issued and enters into force, will have some important and substantial modifications on the issuance of licenses and its regulation.

This is a series of weekly articles that describe the most relevant changes that will affect the regulation of medicinal cannabis in Colombia. The next articles will explore changes made to the requirement to work together with a small/medium producer, to the import and export of cannabis and cannabis material, and finally, to the impact these new changes may have in the valuation of Colombian licensed companies.

Moving to the present issue, there are many noticeable changes in the draft, but the main modification is an addition of some items in the general requirements, as it will affect all license applicants. Many of these requirements are already present in the current regulation, but they only apply to specific types of licenses. This new proposed regulation makes them binding for all types. The Draft provides the following new general requirements:

  • For natural person applicants (either Colombian or foreign)
    • Affidavit that declares the origin of the current and future funds, signed by the applicant and an accountant, attaching a copy of the accountant’s professional license and a certificate of disciplinary records issued by the Central Board of Accountants.
    • Anti-corruption form duly signed by the applicant, according to the form established by the Control Authorities.

 

  • For legal entities (companies)
    • Certificate of shareholder structure, in which the name and ID number of the shareholders that possess 20% or more of the shares, is established.
    • Affidavit that declares the origin of the current and future funds, signed by the applicant’s Legal Representative and an accountant, or the tax auditor, if the company is bound to have one. attaching a copy of the accountant’s professional license and a certificate of disciplinary records issued by the Central Board of Accountants
    • Anti-corruption form duly signed by the applicant, according to the form established by the Control Authorities

 

  • Regarding the real estate used for the activities of the license
    • The certificate that proves the property of the real estate and the liens or encumbrances present in it.
    • In the event the applicant is not the owner of the real estate, a copy of the contract that empowers him/her to use the land must be provided.
    • Certificate of land use, issued by the competent administrative authority, that certifies that the activities to perform under the license are permitted.
    • Affidavit signed by the Legal Representative, in which express manifestation is stated that the licensed real estate is not located in any National Park or Protected area established in the National System of Protected Areas (SINAP, in Spanish).
    • A certificate issued by the Ministry of Interior, that states if any ethnic communities, entitled to a right of previous consultation, are established in the real estate registered for licensing.
      • The previous consultation is a fundamental right that ethnic communities are entitled to, when any activity is going to be performed in their territory. Under the scope of this right, no activity can be carried out without prior authorization of the ethnic community established in a certain territory.
      • If any activity performed under the license directly affects the ethnic community, the applicant must carry out a process of previous consultation enshrined on Convention 169 of the International Labor Organization (ILO), in Law 21 of 1991 and in the Constitutional Court’s case law regarding that matter.

Analyzing the new general requirements necessary for obtaining any license, one would think that it is only a slightly heavier bureaucratic charge in the process of license application. However, taking a deeper look at the documents required and focusing on the certificate issued by the Ministry of Justice, the issuing of this certificate could entail months of delay on the application process, as the verification of the information required may not be an easy task.

Furthermore, if there is any detrimental effect to an ethnic community present in the location of the cannabis project, a process of previous consultation must be held, meaning that the applicant must spend additional resources and time to obtain a license.

In our opinion, this change means that any investor looking for a suitable piece of land must give extraordinary attention to understanding the area where the land is located, its nearby communities, and in general, its social climate. Choosing a piece of land seems to be not just an agronomic decision, but also a social decision.

As to the other changes listed above, they all seem procedural, and do not present, prima facie, a disproportionate burden to the applicant.  Only time will tell if the addition of the new general requirements will mean a disproportionate burden for new license applications.

Note:

The Draft Decree on the Safe and Informed Access to the Use of Cannabis is available in Spanish in the following link:

https://www.minsalud.gov.co/Normatividad_Nuevo/Proyecto%20decreto%20Acceso%20seguro%20e%20informado%20al%20uso%20del%20cannabis.pdf

The current Regulation on Medicinal Cannabis, Decree 613 of 2017 is available in Spanish in the following link:

https://www.minsalud.gov.co/Normatividad_Nuevo/Decreto%20613%20de%202017.pdf

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