Thailand becomes Asia’s first country to liberalize medical cannabis

by Alan Adcock (Tilleke & Gibbins – Thailand)

In January this year, Thailand caught the cannabis industry by surprise, becoming the first Asian country to legalize medicinal cannabis while at the same time restricting foreign participation in the industry for at least the first five years and thwarting cannabis-related patent applications.

With certain amendments to the Narcotics Act and with soon to be promulgated Implementing Regulations to set out Thai FDA medical cannabis registration pathways, a complex roadmap of who can be licensed for what purposes seeks to ensure governmental control over the process for the beginning stages. There are currently four types of licenses that can be acquired, and seven entities that have standing to apply for those licenses. Each entity is only eligible for certain licensed activities and for certain purposes. The system of legislation and licenses currently exists to exclude foreign participation in the Thai cannabis industry through several barriers.

The first barrier to foreign participation is that for the first five years starting from 19 February, 2019 only state agencies may obtain a license to produce, import, or export cannabis. The only way for a private entity to enter the industry is to act jointly with one of the few state agencies that can acquire these commercialization licenses.

The second barrier is that only Thai private entities may participate, even after the five year government development period. Only a private entity, with an office in Thailand and at least 2/3 of directors, partners, or shareholders having Thai nationality, may act jointly with a state agency to acquire or share these types of commercialization licenses or later apply for one on their own. While foreign entities can certainly create local Thai subsidiaries and then apply for a partnership, it is unclear whether it will receive unjustified additional scrutiny or the Ministry of Public Health will even support this kind of application.

The third barrier has been to use quasi-emergency powers to prevent foreign competition. The Patent Office took action to prevent foreign competition by rejecting seven pending cannabis patent applications from foreign applicants, likely violating the WTO TRIPS agreement. By rejecting the patent applications, Thailand retained complete freedom for Thai enterprises to enter the market without being blocked by foreign parties patent rights.

Their basis for rejecting the applications was that the applications would be against “public order and morality,” since the amendments had not yet come into force, rendering the applications illegal. However, under this reasoning, medicinal applications for cannabis will be patentable, but recreational applications will not. Since a single invention may have multiple applications, problems of arbitrary application review procedures arise. More questions loom on the horizon for foreign patent applicants as, under the legislation, it is illegal for non-Thai entities to engage in the cannabis trade. Will this also render any foreign applicant’s patent invalid for violating “public order and morality”?

Thailand’s actions to intentionally exclude foreign participation at the current stage of the industry calls into question their commitment to several major World Trade Organization (WTO) treaties. Fortunately, the amendment allows for the Minister of Public Health to allow new entities to acquire licenses as deemed necessary. This is a key allowance, as who may be allowed access to the industry is open-ended and, with a party who fought for liberal cannabis policies at the reigns, promising. With a population currently in need of medicinal cannabis, the facilities established by the government might not be able to supply enough medical grade cannabis for the current need, or even if it can supply enough, it may not be able to supply it quickly enough. This need for assistance may open up the door for foreign entities to enter the market and provide access to enough medicinal cannabis to meet the current and future demand.