Narcotic Drugs Act 1967

The Act directly applies to:

• Pharmaceutical companies and manufacturers seeking to produce narcotic drugs (opioids, codeine-based products, other Convention-scheduled substances) for use in medicines.
• Medicinal cannabis businesses cultivating cannabis plants, producing cannabis or cannabis resin, or manufacturing cannabis drugs for supply to patients.
• Research institutions and universities undertaking scientific work involving controlled substances under the Convention.
• Directors, officers and business associates of all of the above, who are assessed as part of the fit and proper person test.

The Crown is bound by the Act in each of its capacities (section 5(1)) but is not liable to be prosecuted for an offence (section 5(2)). The Act extends to every external Territory (section 6).

Chapter 2 of the Act expressly applies to the exclusion of State and Territory laws purporting to licence medicinal cannabis cultivation or production for medicinal or scientific purposes (section 7A). This means any business that wants to grow medicinal cannabis in Australia needs a Commonwealth licence under this Act, regardless of any State licensing scheme.

No cultivation, production or manufacture without a licence. A licence holder who cultivates or obtains cannabis plants, produces cannabis or cannabis resin, or manufactures a cannabis drug outside the authority of their medicinal cannabis licence commits an offence under sections 11B, 11D or 11EA. The same applies to narcotic drug manufacture under section 13E.

No activities without a permit. Even licensed holders may not undertake authorised activities until a corresponding permit has been obtained and is in force.

Comply with licence conditions. Breaching a licence condition (other than conditions prescribed by regulations) is an offence under sections 11C, 11E, 11EB (medicinal cannabis) and 13F (narcotic drugs).

Physical security obligations. Licence holders must take all reasonable measures to ensure physical security of cannabis plants or cannabis drugs in their possession or control. This is both a licence grant criterion under section 8G(1)(d) and a continuing condition.

Record-keeping and reporting. Mandatory conditions imposed on all licences include record-keeping and reporting requirements.

Respond to directions. Licence holders and former holders must comply with written directions from the Secretary on security measures, handling, destruction and manufacturing operations (sections 14P, 15, 15A). Failure to comply is an offence under section 15C.

Provide information on request. Licence holders must provide information and documents required by the Secretary under sections 14J, 14K and 14L.

Secretary's licensing powers. The Secretary decides all applications for medicinal cannabis licences (section 8F) and manufacture licences. The Secretary may grant or refuse licences, impose conditions, vary licences on initiative or application, and revoke licences.

Mandatory refusals. The Secretary must refuse to grant a licence if not satisfied on reasonable grounds that the applicant and business associates are fit and proper (section 8G(1)(a)); if satisfied the applicant or a director has committed a serious offence in the 10 years before the application (section 8G(1)(b)); if the grant would be inconsistent with the Convention (section 8G(1)(c)); or if the applicant cannot demonstrate adequate physical security or premises (sections 8G(1)(d)-(e)). False or misleading application information is also a mandatory refusal ground.

Discretionary conditions. After granting a licence, the Secretary may impose additional conditions under section 8K (medicinal cannabis) or section 11L (manufacture).

Revocation. The Secretary must revoke a licence if satisfied on reasonable grounds that the holder has ceased to be a fit and proper person; that a relevant serious offence has been committed; that revocation is necessary to prevent a breach that poses a serious risk to public health or physical security; or that the Convention requires it.

Directions powers. Under sections 14P, 15 and 15A, the Secretary may direct licence holders to take security measures, destroy or otherwise deal with cannabis plants or narcotic preparations, and comply with manufacturing and labelling requirements. Directions override inconsistent licence conditions (section 15B(3)).

Inspection without warrant. Authorised inspectors may enter licensed premises without consent or a warrant during business hours (section 14C). They must announce entry and show identity cards (section 14D). Occupiers may observe the exercise of powers (section 14E).

Warrants. Investigation warrants under Part 3 of the Regulatory Powers Act are available for investigating suspected contraventions.

Injunctions and civil penalties. The Secretary may apply to a relevant court for injunctions (section 14A) and pecuniary penalty orders for civil penalty contraventions (section 13N).

Infringement notices. The Secretary is the infringement officer for strict liability offences under sections 11B(3), 11C(3), 11D(3), 11E(3), 11EA(3), 11EB(3), 13E(3) and 13F(3) and other listed provisions (section 13P).

Annual report. The Secretary must prepare an annual report for the Minister on Convention compliance (section 17).

The Act uses a three-track penalty regime derived from the Regulatory Powers Act model.

Fault-based criminal offences: The most serious offences require proof of fault. Unauthorised cultivation of cannabis plants, production of cannabis or cannabis resin, and manufacture of cannabis drugs (sections 11B, 11D, 11EA), as well as condition breaches (sections 11C, 11E, 11EB), carry penalties of imprisonment for 10 years or 600 penalty units, or both. Unauthorised manufacture of narcotic drugs (section 13E) and condition breaches for manufacture licences (section 13F) carry the same penalties.

Strict liability offences: The corresponding strict liability versions carry 60 penalty units. No mental element is required. These offences are subject to infringement notices under section 13P.

Civil penalty provisions: Each contravention provision has a corresponding civil penalty provision. The civil penalty for unauthorised activity is 1,000 penalty units. For direction failures and labelling offences, it is 600 penalty units. Civil penalties are enforced by the Secretary applying to a relevant court.

Enforceable undertakings. Under section 14, all provisions of the Act are enforceable by the Secretary accepting a compliance undertaking under Part 6 of the Regulatory Powers Act. The Secretary may publish undertakings on the Department's website.

Relevant courts include the Federal Court, the Federal Circuit and Family Court of Australia (Division 2), and jurisdiction-competent State and Territory courts.

Licence applications. Applications must be in the form approved by the Secretary, must contain prescribed and specified information, and must be accompanied by any prescribed fee (section 8E(2)-(3)). Applications may be withdrawn before a decision but fees are not refundable (section 8E(4)). The Secretary must make a decision on each application.

Permit applications. After a licence is granted, the holder must apply for and obtain a permit before undertaking any authorised activity. Permits specify types and quantities.

Variation. The Secretary may vary a licence on initiative (section 10M(1)) or on application. Applications for variation on the holder's initiative must be decided. Mandatory reasons and review rights attach to variation decisions.

Revocation. The Secretary must give notice before revoking a licence (except in urgent circumstances). Revocation takes effect as specified in the notice.

Review of decisions. All significant decisions (listed in section 15E(1)) are reviewable. The process is:

1. Written notice from the Secretary containing terms of decision, reasons (subject to sensitive law enforcement information restrictions), and review rights.
2. Internal review: application to the Minister within 90 days of the notice (section 15G). The Minister reviews personally or delegates to an internal reviewer (section 15H).
3. Administrative Review Tribunal review: available after internal review (section 15L).

Destruction orders. Where the Secretary requires destruction under section 15, the costs are recoverable from the licence holder as a debt.

Single Convention on Narcotic Drugs, 1961 (Schedule 1). The Convention is the primary international instrument the Act implements. Section 8G(1)(c) requires the Secretary to refuse a licence if it would be inconsistent with Australia's Convention obligations. The Act must be read alongside the Convention.

Therapeutic Goods Act 1989 (Cth). The definition of "permitted supply" in section 4 cross-references TGA clinical trial approvals, TGA authorisations and TGA-notified trials. A cannabis drug can only be lawfully supplied for medicinal purposes if the supply falls within permitted supply. Changes to TGA authorisation regimes directly affect the scope of permitted supply under this Act. In Eve Hemp Pty Limited v Secretary to the Department of Health [2017] FCA 1051, Jagot J considered whether a Poisons Standard amendment under the TGA was invalid partly because of an alleged misunderstanding of the Single Convention and this Act.

Regulatory Powers (Standard Provisions) Act 2014 (Cth). The Act delegates most of its monitoring, investigation, civil penalty, infringement notice, enforceable undertaking and injunction machinery to the Regulatory Powers Act. Practitioners must read the two Acts together to understand the full extent of inspection and enforcement powers.

Customs Act 1901 (Cth). Sections 19-21 apply Customs Act provisions to the importation and exportation of narcotic drugs and raw materials.

State and Territory drug laws. Section 7 provides that this Act does not exclude State and Territory laws except where inconsistent with an express provision. However, section 7A expressly overrides State and Territory laws purporting to licence medicinal cannabis cultivation or production for medicinal or scientific purposes, giving the Commonwealth regime exclusive operation in that space.

Narcotic Drugs (Licence Charges) Act 2016 (Cth). The definition of "charge" in section 4 refers to charges imposed by this separate Act. Licence charges for medicinal cannabis licences are imposed by that Act.

Acts Interpretation Act 1901 (Cth). Section 8C preserves the operation of Part VIIC of the Crimes Act 1914, which deals with spent convictions. The fit and proper person assessment is limited accordingly.

Chapter 2 prevails over State law. Section 7A gives Chapter 2 (medicinal cannabis) exclusive Commonwealth operation. Any business that relies on a State licence for cannabis cultivation or production is not protected if Chapter 2 applies to their activities. The State licence is of no effect to the extent of the inconsistency.

Business associates are assessed, not just the applicant. The fit and proper person test applies to the applicant and to each of their relevant business associates (section 8G(1)(a)). A serious offence committed by a business associate within the last 10 years can be a ground for mandatory refusal. Applicants must disclose relevant associates and their backgrounds.

Serious offence is broadly defined. A "serious offence" includes any offence involving dishonesty, fraud or drug trafficking punishable by at least 3 months imprisonment, and any offence punishable by at least 5 years imprisonment (section 4). This is not limited to drug offences.

The licence and the permit are two distinct documents. A medicinal cannabis licence authorises activities in principle. No activities may be undertaken until a permit is also obtained. The permit specifies the detail (quantities, timeframes, specific activities). Licence holders who commence without a permit commit an offence.

Licensed premises entry without warrant. Unlike most search and entry regimes, section 14C authorises inspectors to enter licensed premises during business hours without consent or a warrant. This is broader than general investigative powers. Occupiers must be told of entry and may observe, but cannot refuse.

Former licence holders remain subject to directions. Sections 14P and 15 apply to "a person who is a licence holder, or who has been a licence holder." Obligations do not expire on revocation. Former holders can be directed to take security measures, destroy materials or regulate their handling of previously licensed substances.

Sensitive law enforcement information can be withheld from reasons. If the Secretary relies on sensitive law enforcement information in making a reviewable decision, the reasons given to the applicant will not include that information (section 15F(2A)). Applicants may not know the full basis for a refusal or revocation.

Directions override licence conditions. Under section 15B(3), a Secretary's direction that is inconsistent with a licence condition renders the licence condition of no effect to the extent of the inconsistency. The direction prevails.

Pharmaceutical manufacturer. A pharmaceutical company wishes to manufacture morphine-based pain medicines in Australia. It must obtain a manufacture licence under Chapter 3 (section 11G). Before any manufacturing begins, it needs a manufacture permit specifying the types and quantities of narcotic drugs to be manufactured (section 12). It must pass the fit and proper person test, demonstrate adequate security and facilities, and ensure the manufacturing is consistent with the Convention. Authorised inspectors may enter its facilities during business hours without a warrant (section 14C).

Medicinal cannabis cultivator. A company proposes to cultivate cannabis plants and produce cannabis extract for medical use. Under section 7A, this activity falls under the Commonwealth's exclusive Chapter 2 scheme: a State cultivation licence does not authorise the activity. The company must apply for a medicinal cannabis licence (section 8E) covering cultivation and production. The Secretary assesses the company, its directors and business associates as fit and proper, checks physical security, verifies consistency with the Convention, and may impose conditions. Only after a medicinal cannabis permit is also granted may cultivation begin.

Condition breach. A medicinal cannabis licence holder who cultivates more cannabis plants than permitted under their permit, or fails to maintain required records, breaches a licence condition under section 11C. The fault-based offence carries a maximum penalty of 10 years imprisonment or 600 penalty units. A strict liability version with a 60-penalty-unit penalty is also available.

Post-revocation direction. The Secretary revokes a medicinal cannabis licence after discovering the holder has committed a serious offence. The holder still has cannabis plants in their facility. Under section 15, the Secretary may direct the former holder to destroy or otherwise deal with those plants. The direction must be complied with. Costs of Secretary-arranged destruction are recoverable from the former holder as a debt.

Review of licence refusal. An applicant is refused a medicinal cannabis licence. The written notice under section 15F states the terms and reasons (subject to sensitive law enforcement information restrictions) and explains review rights. The applicant has 90 days from the notice to apply to the Minister for internal review (section 15G). After internal review, if still aggrieved, the applicant may apply to the Administrative Review Tribunal under section 15L.