BILLS DIGEST NO. 34, 2016–17              8 November 2016

Narcotic Drugs Legislation Amendment Bill 2016 [and] Narcotic Drugs (Licence Charges) Bill 2016

Jonathan Mills
Law and Bills Digest Section

Date introduced:  14 September 2016

House:  House of Representatives

Portfolio:  Health

Commencement: Schedules 1 and 2 of the Amendment Bill commence on the day the Act receives Royal Assent. Schedule 3 commences on the later of the commencement of section 1 to the Narcotic Drugs (Licence Charges) Act 2016, or Royal Assent. 

The Licence Charges Bill commences on Royal Assent.

Links: The links to the Narcotic Drugs Legislation Amendment Bill 2016, its Explanatory Memorandum and second reading speech, and the Narcotic Drugs (Licence Charges) Bill 2016, its Explanatory Memorandum and second reading speech can be found on the Bills’ home pages, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at November 2016.

Purpose of the Bills

The purpose of the Narcotic Drugs Legislation Amendment Bill 2016 (the Amendment Bill) is to amend the Narcotic Drugs Act 1967 (the ND Act), as recently amended by the Narcotic Drugs Amendment Act 2016, to protect ‘sensitive law enforcement information’ that is held by or provided to the Secretary of the Department of Health for the purposes of making licensing decisions under the ND Act.

The Bill will also make amendments to the Therapeutic Goods Act 1989 to allow regulations to be made specifying conditions and prohibitions for Special Access Scheme approvals for otherwise unapproved therapeutic goods, in certain circumstances.

The purpose of the Narcotic Drugs (Licence Charges) Bill 2016 (the Licence Charges Bill) is to allow charges to be levied on licences granted under the ND Act, including those recently introduced by the Narcotic Drugs Amendment Act 2016.

Structure of the Bills

The Amendment Bill is divided into three Schedules.

Schedule 1 amends the ND Act to protect sensitive law enforcement information provided to or held by the Secretary of the Department of Health for decision making related to licences under the ND Act. The amendments in Schedule 1 also have the effect of altering the operation of the Administrative Appeals Tribunal Act 1975 to align its operation in relation to decisions made under the ND Act with the protection of certain law enforcement information.

Schedule 2 is divided into a number of parts:

•       Parts 1 to 4 amend the ND Act for other purposes including specifying notification requirements, guidelines and standards, authority to supply cannabis seeds and various miscellaneous amendments.

•       Part 5 amends the Therapeutic Goods Act 1989 to provide for regulations to be made to control the making of Special Access Scheme approvals in certain circumstances.

Schedule 3 amends the ND Act to introduce minor amendments relating to payment arrangements for licence charges that would be imposed under the proposed Licence Charges Bill.

The Licence Charges Bill enables charges to be imposed on ND Act licence holders, with the amount of charge and other matters to be prescribed by regulation.

Background

Narcotic Drugs Amendment Act 2016

The Narcotic Drugs Amendment Act 2016 was passed by Parliament in February 2016 and received Royal Assent on 29 February 2016. Most of its provisions commenced on 29 October 2016. This Act amended the ND Act to regulate the cultivation, production and manufacture of cannabis for medical or scientific purposes, while providing the regulatory controls necessary to fulfil Australia’s international treaty obligations.[1]

This measure provides the necessary Commonwealth legislation to permit the cultivation and manufacture of cannabis for medicinal or research purposes, while the supply to end users for medicinal purposes will be within the control of states and territories.[2] The Office of Drug Control information page states that licensees must also conform with relevant state and territory laws.[3]

The provisions also operate in conjunction with the existing medicines authorisation schemes in the Therapeutic Goods Act 1989, and so will enable the authorised trial and prescription of cannabis derived medical products. The definitions of products that may be approved are broad, providing some discretion in the nature of approved products in response to evidence.

The legislation restricts production to cannabis grown solely for approved research or for medicinal products. The ND Act includes fit and proper person tests for licensees and provides penalties for breaches of the requirements.

Further regulatory details of the licensing and permit scheme have been supplied by the Narcotic Drugs Regulation 2016, tabled on 17 October 2016.

Upon commencement of the relevant amendments, on 29 October 2016, the Department of Health announced that the licensing scheme had commenced:

Businesses can now apply for a licence to cultivate cannabis for medicinal purposes, to manufacture medicinal cannabis products or to conduct medicinal cannabis related research under the Medicinal Cannabis Scheme. 

The Minister for Health, Sussan Ley, said the commencement of the Narcotic Drugs Amendment Act 2016 will give patients and doctors access to a safe, reliable and legal source of cannabis for medicinal use. 

…

The Medicinal Cannabis Scheme is the result of extensive consultation between the Federal Government and State and Territory authorities in the development of regulatory regulations and security protocols for the cultivation, production and manufacture of medicinal cannabis.

The Office of Drug Control, within the Department of Health, regulates the medicinal cannabis framework and those interested in applying for a licence can find detailed information at the Office of Drug Control website.[4]

The Department of Health has also provided the following information on the operation of the new scheme:

·          Medicinal Cannabis products are therapeutic goods, which means they must be supplied in accordance with the provisions of the Therapeutic Goods Act 1989, either as registered goods, which are assessed for safety, quality and efficacy, or as unregistered goods through either the Special Access Scheme or Authorised Prescriber Schemes. Unregistered medicines are not assessed for efficacy by the TGA.

·          Therapeutic goods must also comply with relevant state/territory drug and poisons legislation. States and territories are responsible for the distribution of therapeutic goods through pharmacies and it is expected that, for the most part, medicinal cannabis products will be distributed in accordance with existing legislation. Queensland and Victoria have, however, enacted special legislation dealing with this.

·          The Commonwealth will be responsible for licensing cultivation of cannabis for medicinal purposes and for manufacturing into medicinal cannabis products. To hold a licence, licensees must pass strict fit and proper persons requirements and other legislative tests relating to security.

·          Access to medicinal cannabis products will be on prescription from an appropriately qualified medical practitioner [who] is approved by the state/territory to prescribe these products and has the appropriate TGA approvals.[5]

Reason for the current Bills

As discussed in the Explanatory Memorandum for the Amendment Bill, under the licensing scheme in the ND Act the Secretary must refuse to grant a licence if not satisfied on reasonable grounds that an applicant and each of the applicant’s business associates is a fit and proper person. This decision is reviewable to the Minister and then to the Administrative Appeals Tribunal (the AAT).

The information considered by the Secretary in assessing whether an applicant is a fit and proper person may include information and documents that the Secretary is empowered to request from Commonwealth, state and territory agencies, including law enforcement agencies.

Law enforcement agencies may hold information relevant to determining if a person is a fit and proper person, but the disclosure of that information to the person or the public may ‘prejudice law enforcement operations, intelligence collection or the safety of certain persons’. The Amendment Bill is intended to prevent the disclosure of such sensitive information.[6]

The reason for the Licence Charges Bill is simply to enable charges to be levied on licences issued under the ND Act. The Explanatory Memorandum states that the Commonwealth does not intend to impose cost-recovery on manufacture licences ‘at this time’, but that for medicinal cannabis and cannabis research licences the amount of the charge will be consistent with cost recovery guidelines.[7]

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills reported on the Bills in its Alert Digest of October 2016.[8] The Committee raised some concerns with the Amendment Bill. In particular, the Committee sought the Minister’s advice regarding:

•       why the definition of ‘law enforcement agency’ should be able to be expanded by regulation[9]

•       why the natural justice hearing rule was excluded from the provisions precluding the sharing of sensitive law enforcement information in certain circumstances[10]

•       justification for reversing the evidential burden of proof for a person relying on an exception to the proposed offence of disclosing sensitive law enforcement information,[11] and

•       why the Minister is able to make standards that incorporate matter from another instrument or writing, thus avoiding parliamentary oversight of such matter as it may be amended.[12]

At the date of publication of this Digest, the Committee had not published a response from the Minister.

The Committee had no comment on the Licence Charges Bill.[13]

Policy position of non-government parties/independents

At the time of writing, no policy positions on the present Bills had been expressed. Non-government parties and independents in the 44th Parliament broadly supported the medicinal cannabis cultivation, licensing and production scheme as proposed in February 2016 under the Narcotic Drugs Amendment Act 2016.[14]

However, while Senator Richard Di Natale of the Australian Greens ‘cautiously welcomed’ the earlier Bill he also stated that it was ‘just the first piece of the puzzle’ and that ‘the final test for any reform is whether it will get this medicine in the hands of everyone who needs it.’[15] 

Position of major interest groups

At the time of writing, no stakeholder views on the present Bills were available.

However, earlier in 2016 several stakeholders commented on the medicinal cannabis cultivation, licensing and production scheme that went on to be introduced under the Narcotic Drugs Amendment Act 2016.

AusCann, a company that intends to become a licensed producer of medicinal marijuana announced support for the opportunities provided by the scheme.[16]

Others involved in the production of whole cannabis medicinal products criticised the apparent bias towards the pharmaceutical industry over natural products.[17]

The Pharmaceutical Society of Australia (PSA) welcomed the scheme ‘as an important first step to allow for the safe and appropriate therapeutic use of cannabis.’[18]

Financial implications

The Government has indicated that while the cultivation licensing scheme for cannabis will incur some administrative costs, these are proposed to be funded from a cost recovery scheme of fees under the ND Act and as proposed under the Licence Charges Bill.[19]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bills’ compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[20]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights considers that the Bills do not raise human rights concerns.[21]

Key issues and provisions

Sensitive law enforcement information

Schedule 1 of the Amendment Bill contains amendments to the ND Act designed to protect sensitive law enforcement information that is provided to or held by the Secretary for decision making related to the granting of licences under the ND Act.

Item 1 of Schedule 1 introduces definitions for ‘law enforcement agency’ and ‘sensitive law enforcement information’ into subsection 4(1) of the ND Act. A law enforcement agency is a body, agency or organisation that is responsible for or deals with law enforcement, criminal intelligence, criminal investigation, fraud or security intelligence in Australia (or part of Australia) This part of the definition is the same as the definition of ‘Australian law enforcement or intelligence agency’ in section 503A of the Migration Act 1958. However, the definition inserted by item 1 also allows a further body, agency or organisation to be prescribed as a ‘law enforcement agency’ by the regulations. As set out above, the Scrutiny of Bills Committee has sought further information from the Minister on the appropriateness of this approach.[22]

‘Sensitive law enforcement information’ is defined as information which, if disclosed, is reasonably likely to prejudice Australia’s law enforcement interests, including interests in avoiding disruption to law enforcement and criminal intelligence, protecting technologies used to collect and analyse criminal intelligence, and protecting the safety of witnesses or informants.

Items 4,7,16 and 18 provide that where notices are to be given to licence holders under sections 11, 13C, 15F and 15J (including notices to grant, refuse, vary or revoke a medical cannabis licence or permit), such notices must not disclose information identified as sensitive law enforcement information.

Item 10 inserts proposed section 14LA to deal with the identification of information as sensitive law enforcement information. Under proposed subsection 14LA(1), if a person from a law enforcement agency who supplies information to the Secretary knows or believes that the information is, or includes, sensitive law enforcement information then they must identify it as such. Similarly proposed subsection 14LA(2) requires the Secretary to identify information that they possess from another source and that they know or believe is sensitive law enforcement information.

Item 11 introduces, in proposed section 14MA, offences for the unauthorised disclosure of sensitive law enforcement information obtained under the ND Act.

The natural justice hearing rule

The natural justice ‘hearing rule’ requires that a person should be informed of matters adverse to them before a decision is made, giving them an opportunity to respond.[23]

Item 20 inserts proposed section 21A that provides that where the natural justice hearing rule would otherwise require the disclosure of information identified as sensitive law enforcement information under the ND Act, then the Act itself ‘is taken to be an exhaustive statement of the requirements of the rule in relation to the disclosure of that information.’

The Explanatory Memorandum states:

This measure is intended for consistency with the provisions relating to non-disclosure of sensitive law enforcement information, and to ensure that the natural justice hearing rule does not undermine the safeguards … in relation to the non-disclosure of sensitive law enforcement information. 

Thus, the non-disclosure of that information to a person adversely affected by a decision would not result in the decision being found by a court to be unlawful even though the person was not made aware of the information prior to the decision being made.[24]

However, as mentioned above, the Senate Standing Committee for the Scrutiny of Bills questioned this exclusion of the rule, commenting that it may not be necessary and that courts would apply the rule with sensitivity to the public interest.[25] The Committee sought the Minister’s advice on ‘why it is necessary to exclude the natural justice hearing rule, given that the courts apply that rule by reference to a particular statutory scheme and its underlying purposes’. [26]

Operation of the Administrative Appeals Tribunal Act 1975

Item 19 of Schedule 1 of the Amendment Bill introduces proposed sections 15M and 15N which aim to prevent the disclosure of sensitive law enforcement information when an application is made to the Administrative Appeals Tribunal (AAT) for review of a relevant decision under the ND Act.

Proposed section 15M allows the Secretary to apply to the AAT for orders relating to a private hearing or restricting attendees or the publication or disclosure of information under section 35 of the Administrative Appeals Tribunal Act 1975 (AAT Act) if an application has been made for review of a decision under the medicinal cannabis licensing scheme. This information may include, but is not limited to, information identified as sensitive law enforcement information under the ND Act.

Proposed subsection 15M(3) provides that, following such an application, the AAT may make an order where it is satisfied that the order is necessary to:

(a)     avoid disruption to law enforcement, criminal intelligence or investigations or security intelligence

(b)    protect the technologies and methods of law enforcement agencies

(c)     protect and ensure the safety of informants, witnesses or their associates, or persons involved in the protection or safety or informants or witnesses, or

(d)    ensure that intelligence and law enforcement agencies are not discouraged from giving information to a nation’s government and government agencies.

Proposed section 15N provides that the decision-maker is not required to supply information identified as sensitive law enforcement information in a statement if a person applies for review of a reviewable decision (as listed at section 15E of the ND Act).

Other provisions

Schedule 2 of the Amendment Bill is divided into a number of parts.

Parts 1 to 4 amend the ND Act for other purposes including specifying notification requirements, guidelines and standards, authority to supply cannabis seeds and various miscellaneous amendments.

Part 1 of Schedule 2 introduces amendments to sections 10K and 12N of the ND Act. Section 10K requires a cannabis licence holder to notify the Secretary if any listed matters, including a breach of the licence, occur. Section 12N provides the same requirement for a manufacture licence. Currently, these sections require the Secretary to be notified ‘as soon as reasonably practical’. The amendments at items 1 to 6 provide that licence holders must notify the Secretary of these matters ‘as soon as reasonably practicable’ or within a period prescribed by the regulations. The Explanatory Memorandum explains that this will ‘remove discretion from the licence holder for matters where it is deemed important enough that the Commonwealth is notified within a defined period’.[27]

Part 2 of Schedule 2 contains amendments relating to guidelines and standards, primarily introducing new grounds for refusal to grant licences and permits into the various relevant sections of the ND Act.[28] The new grounds include where the Secretary:

•       is not satisfied that standards are or will be met, or

•       is satisfied that circumstances prescribed by regulations exist.

Item 28, however, provides the Minister with new powers to issue standards and guidelines for the purposes of the Act. As discussed above, the Senate Standing Committee for the Scrutiny of Bills raised concerns with proposed subsection 26B(2) as inserted by item 28, questioning why it was necessary that the standards should be able to apply, adopt or incorporate matter contained in another instrument or writing.[29] The Committee was concerned that the incorporation of information by reference to other documents may create uncertainty and may allow changes to occur without parliamentary scrutiny.[30]

Part 3 of Schedule 2 contains only item 30. This item inserts proposed subparagraph 9D(1)(c)(ia) that would add the supply of cannabis plants (and seeds) to the list of activities that may be permitted under a cannabis research licence. Proposed subparagraph 9D(1)(c)(ia) would limit this supply to other holders of cannabis research or medicinal cannabis licences. The Explanatory Memorandum states that it is important for researchers to be able to supply other licensed growers with any new varieties that they may produce.[31]

Part 4 of Schedule 2 contains miscellaneous amendments to the ND Act including various technical amendments, but also inserts provisions specifying that the Secretary must refuse to grant the various licences where false or misleading information is provided by an applicant.[32]

Special Access Scheme Approvals

Part 5 of Schedule 2 will make amendments to the Therapeutic Goods Act 1989 to allow regulations to be made specifying conditions and prohibitions for Special Access Scheme approvals for otherwise unapproved therapeutic goods, in certain circumstances.

Section 19 of the Therapeutic Goods Act allows for the Secretary to grant exemptions for special and experimental uses of therapeutic goods that are not otherwise approved.

Item 47 of Schedule 2 amends subsection 19(1A) to permit regulations to be made specifying conditions on Special Access Scheme approvals for treatment purposes, in addition to the existing provision in that subsection for regulations to be made specifying conditions on Special Access Scheme approvals for experimental purposes.

Item 48 repeals existing subsection 19(8), which enables regulations to be made setting out circumstances in which approvals for experimental purpose (that is, under paragraph 19(1)(b)) must not be made. It substitutes proposed subsection 19(8) which provides that the regulations may prescribe the circumstances in which Special Access Scheme approvals for treatment purposes (that is, under paragraph 19(1)(a)) must not be given. These circumstances may include, but are not limited to, circumstances relating to classes of therapeutic goods, therapeutic goods when used to treat a specified class of persons, and therapeutic goods when used for a particular indication.

Licence charges

Schedule 3 of the Amendment Bill amends the ND Act to introduce minor consequential amendments relating to payment arrangements necessary for licence charges that would be imposed under the proposed Narcotic Drugs (Licence Charges) Act 2016.

The Licence Charges Bill would establish a new Act that would enable charges to be imposed on ND Act licence holders and for the amount of charge and other matters to be prescribed by regulation.

Clause 6 of the Licence Charges Bill will allow charges to be imposed on any licence that is in force during a financial year or during a period prescribed by regulations. Clause 3 defines ‘licence’ to mean a licence granted under the ND Act.

Clause 7 provides that the charge is payable by the licence holder. Clause 8 allows the amount of the charge to be prescribed by regulation, and clause 9 provides that the Governor-General may make regulations for that and other purposes.

Concluding comments

While some criticisms of the mechanisms proposed by the Amendment Bill have been raised, and the future success or otherwise of the overall medicinal cannabis scheme is unknown at this time, these Bills propose relatively minor but necessary legislative additions to the operation of that scheme.

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[1].              Australia has international obligations under the international drug control conventions, particularly the Single Convention on Narcotic Drugs 1961, to control listed narcotic drugs, including cannabis. The Commonwealth is responsible for ensuring that Australia meets these obligations. The Single Convention on Narcotic Drugs 1961 makes a distinction between recreational, medical and scientific uses of drugs; nations are allowed to permit medical or scientific use of drugs, but recreational use is prohibited by Article 4. Article 28 requires states to place the same controls on the cultivation of cannabis as apply to opium poppies. Article 23 requires a national agency to be established to take ‘physical possession’ of crops, and control licencing and reporting. Such a scheme currently exists for medicinal poppy production in Australia, also largely under the Narcotic Drugs Act 1967, operating in concert with state laws.

[2].              S Ley (Minister for Health and Aged Care), Medicinal cannabis scheme licence applications open, media release, 30 October 2016.

[3].              The Office of Drug Control, Medicinal cannabis manufacture licences and permits, version 1.0, Department of Health, Canberra, 2 November 2016.

[4].              S Ley (Minister for Health and Aged Care), Medicinal cannabis scheme licence applications open, media release, 30 October 2016.

[5].              Ibid.

[6].              Explanatory Memorandum, Narcotic Drugs Legislation Amendment Bill 2016 (the Amendment Bill), pp. 1–3.

[7].              Explanatory Memorandum, Narcotic Drugs (Licence Charges) Bill 2016 (the Licence Charges Bill), p. 1.There is to be no cost recovery in relation to manufacturing at this stage because the states/territories hold direct responsibility for compliance monitoring of these licences.

[8].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, The Senate, 12 October 2016, pp. 83–87,

[9].              Item 1 of Schedule 1, proposed subsection 4(1).

[10].              Items 4, 7, 16, 18, 20 and 21 of Schedule 1.

[11].              Item 11 of Schedule 1, proposed subsection 14MA(2).

[12].              Item 28 of Schedule 2, proposed subsection 26B(2).

[13].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, op. cit., p. 88.

[14].              See the ‘Second reading speeches: Narcotic Drugs Amendment Bill 2016’, Senate and House of Representatives, Debates, 2016.

[15].              R Di Natale (Australian Greens Leader), Medicinal cannabis bill only the first piece of the puzzle: Greens, media release, 10 February 2016.

[16].              P Timms, ‘Legalisation of medicinal cannabis could create jobs’, The World Today with Eleanor Hall, Australian Broadcasting Corporation (ABC) News, 10 February 2016.

[17].              Elixinol, ‘Are Australia's new legal cannabis laws designed to fail?’, Newsmaker, 14 February 2016.

[18].              Pharmaceutical Society of Australia, Medicinal cannabis Bill an important first step, media release, 10 February 2016.

[19].              Explanatory Memorandum, Amendment Bill, op. cit., p. 4; Explanatory Memorandum, Licence Charges Bill, op. cit., p. 1.

[20].              The Statements of Compatibility with Human Rights can be found at page 7 of the Explanatory Memorandum to the Amendment Bill and page 2 of the Explanatory Memorandum to the Licence Charges Bill.

[21].              Parliamentary Joint Committee on Human Rights, Report, 7, 2016, The Senate, Canberra, 11 October 2016, p. 99. 

[22].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, op. cit., p. 83.

[23].              Administrative Review Council (ARC), Decision making: natural justice, Best practice guide, 2, Attorney-General’s Department, Canberra, August 2007.

[24].              Explanatory Memorandum, Amendment Bill, op. cit., p.15.

[25].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, op. cit., pp. 84–85.

[26].              Ibid., p. 85.

[27].              Explanatory Memorandum, Amendment Bill, op. cit., p.16.

[28].              Items 9–27.

[29].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 7, 2016, op. cit., pp. 86–87.

[30].              Ibid.

[31].              Explanatory Memorandum, Amendment Bill, op. cit., p. 21.

[32].              Items 36, 37, 39, 40, 42 and 43 of Schedule 2.