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COWEN COLLABORATIVE INSIGHTS February 25, 2019 Global CBD Landscape (Azer) 2 International Drug Conventions (UN) There are three international conventions that are core to the drug control system: (1) 1961 Single Convention on Narcotic Drugs, (2) 1971 Single Convention on Psychotropic Substances and (3) 1988 Single Convention Against Illicit Traffic in Narcotic Drugs and Psychoactive Substances. Under the 1961 Convention, cannabis extracts and tinctures are currently classified as Schedule | substances based on high abuse and dependence potential. Resin and herbal cannabis are classified as Schedule IV, the most prohibitive category, including dangerous substances that have little to no medical benefits. THC is classified as a Schedule || substance in the 1971 Convention. CBD does not currently have its own scheduled class in the Conventions. Based on recent recommendations from the World Health Organization (WHO), these classifications are likely to change in the short term. Although the cannabis plant, as a whole, is scheduled under the conventions, there is not a distinct separation between marijuana and hemp at the moment. However, there is an exemption in the conventions for industrial uses of hemp, permitted there is no potential for abuse. The language in the treaties is vague and has allowed member states to interpret the conventions in a way that permits the use of hemp to fit their national legislation. This is a principle based on the practice of “good faith.” Cannabis Recommendations (WHO) Beginning in November 2017, CBD was subject to its first pre-critical review conducted by the WHO at the 39th meeting of the Expert Committee on Drug Dependence (ECDD). Following the critical review of CBD at the ECDD’s 40th meeting, it was recommended that “pure CBD should not be scheduled in the International Drug Control Conventions.” Further clarifications were recently added outlining that CBD preparations containing less than 0.2% THC should be removed from the drug conventions. The clarification does not specifically mention the difference between CBD preparations derived from hemp or marijuana. This outcome is based on expert consultations that found that CBD has no potential for abuse or dependence. CBD will be the first cannabinoid not controlled under international law. The WHO also recommended that THC be removed from the 1971 Convention and listed under Schedule |. Similarly, it recommended that herbal cannabis and resin remain under Schedule | and removed from Schedule IV of the 1961 Convention. Extracts and tinctures were also recommended to be removed from Schedule |. This marks a historic decision because this was the first time cannabis has ever been subject to a critical review conducted by the WHO. In March 2019, the Commission on Narcotic Drugs, comprised of 53 countries, will vote on the WHO’s recommendations to schedule substances. A simple majority is required. However, it is uncertain whether the member states will vote on cannabis and its derivatives since the WHO delayed the announcement of the recommendation by two months. This may postpone the vote until 2020. When the vote is passed to remove pure CBD and CBD preparations, countries that permit the use of pure CBD and preparations of CBD will not be in violation of any international treaties. Although countries would no longer be obliged to enforce any control on CBD, national jurisdictions may still implement measures to regulate or prohibit CBD use. COWEN.COM 79 HOUSE_OVERSIGHT_024895