Case Comment – Organigram Inc v Canada (Attorney General), 2023 FC 1075

Update – March 22, 2024: Following the Federal Court’s decision to remit this matter back to Health Canada, Health Canada issued its final redetermination. Health Canada maintained its decision that the Edison Jolts were classified as edible cannabis, not cannabis extracts, and therefore subject to the maximum THC content of 10 mg per immediate container. Organigram has since stopped the production of Jolts in their current format.

Original Post – August 11, 2023: This case highlights that commercial interests at stake in the evolving cannabis industry may not warrant a heightened standard of procedural fairness on judicial review, but procedural fairness remains important all the same. It also underscores the challenges cannabis brands face when innovating new products, given the lack of jurisprudence and challenging regulatory definitions in the Cannabis Act and Regulations.

The case was a judicial review of a decision by Health Canada regarding the classification of “Edison Jolts,” a product manufactured by Organigram, under the Cannabis Act and Cannabis Regulations. Health Canada determined that the Jolts should be classified as edible cannabis due to their “lozenge” form, thereby subjecting them to a maximum THC content of 10 mg per immediate container. Organigram argued the Jolts should be classified as cannabis extract, which would allow for a higher THC limit of 1000 mg per immediate container. The issue was whether Health Canada had afforded Organigram appropriate procedural fairness in rejecting Organigram’s arguments and issuing a Non-Compliance Determination and phase-out order.

Initially, in response to Organigram’s Notice of New Cannabis Product (NNCP), Health Canada issued a Notice of Non-Compliance inviting further submissions from Organigram with respect to the Jolts’ classification.

Following Organigram’s submissions, Health Canada issued a Non-Compliance Determination. In the Determination, Health Canada confirmed that the Jolts were classified as edible cannabis for the following reasons:

1. Product Format: the Jolts’ format resembling hard candies aligned with confectionery products and traditional food;
2. History of Use: Health Canada noted that confectionery products, like hard candies, have a long history of being perceived and consumed as food;
3. Product Sensory and Physical Characteristics: Health Canada highlighted that Jolts’ physical appearance and sensory aspects, such as their sweet taste, shape, and size, contribute to the perception of being food-like; and
4. Product Representation: The marketing and representation of Edison Jolts, using descriptors like “flavor” and associating the product with food, reinforced the argument that the product is intended not only for delivering cannabis but also to satisfy taste or flavor preferences.

In light of this assessment, Health Canada required Organigram to phase out the Jolts by specific dates. Critically for this case, the Jolts’ sensory and physical characteristics, including size and shape, had only been raised in the Non-Compliance Determination, not the initial Notice of Non-Compliance.

On the standard of review, both parties agreed on the applicable legal framework for assessing procedural fairness using the Baker factors. However, the parties differed on how these factors should apply. Organigram asserted a substantial level of procedural fairness was warranted on the basis the decision was not merely administrative but had significant commercial implications. It highlighted the absence of an appeal mechanism and the importance of the decision to its products and market standing.

In contrast, Health Canada disputed the need for elevated procedural fairness, emphasizing the regulatory nature of the decision and the flexibility in the statutory scheme’s administration. It argued that the decision’s impact on commercial interests did not warrant heightened procedural rights according to Baker and stressed the absence of legitimate expectations and the constrained nature of Health Canada’s procedures.

The Court accepted Health Canada’s position on the procedural fairness issue. The decision’s administrative nature, discretionary process, and lack of appeal mechanism pointed to a lower level of procedural fairness. The Court found that commercial interests typically hold lower importance compared to decisions affecting individuals’ lives. No legitimate expectation for specific procedures existed, and Health Canada had discretion in choosing its processes. Accordingly, the Court concluded that the procedural fairness owed to Organigram fell at the lower end of the spectrum.

However, with respect to whether there was a breach of procedural fairness at this lower standard, the Court agreed with Organigram on one specific aspect – the adequacy of notice and disclosure during the decision-making process. In the Non-Compliance Determination, Health Canada had introduced a fourth factor underpinning its decision, namely the product’s sensory and physical characteristics, including size and shape. This factor had not been raised in the initial Notice of Non-Compliance, nor was it addressed in a guidance document, policy document, the Cannabis Act, or Cannabis Regulations. As such, Organigram was not provided notice of or the opportunity to respond to this new concern. The Court found that this lack of notice prevented Organigram from responding effectively , which significantly influenced Health Canada’s decision.

For this reason, the Court remitted the case back to Health Canada for redetermination. The Court also directed Health Canada to clearly identify the policies and procedures upon which it will rely in making determinations of non-compliance based on the classification of cannabis products in order to avoid future challenges based on procedural fairness.

For this reason, the Court remitted the case back to Health Canada for redetermination. The Court also directed Health Canada to clearly identify the policies and procedures upon which it will rely in making determinations of non-compliance based on the classification of cannabis products in order to avoid future challenges based on procedural fairness.

Read the full case here: https://decisions.fct-cf.gc.ca/fc-cf/decisions/en/523941/1/document.do