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This article was translated using AI-assisted translation tools. Despite careful review, linguistic inaccuracies or deviations in meaning cannot be entirely excluded. The original version of the article shall prevail. This article first appeared on anwalt.de.
The Hamburg Administrative Court (VG Hamburg) set a milestone for the recreational cannabis market with its ruling of March 27, 2026 (Case No.: 3 K 39/26) on board member compensation in cultivation associations.
The decision is significant because the court issued a clear rejection of the restrictive interpretation by authorities practiced in many German federal states regarding board member compensation. The court declared the condition stating that
“no statutory or contractual compensation (§ 40 BGB in conjunction with § 27 para. 3 sentence 2 BGB) may be granted to board members and other persons authorized to represent the cultivation association that exceeds the level of marginal employment within the meaning of § 8 para. 1 SGB IV”,
to be unlawful.
The Court’s Central Argument
It follows from § 17 para. 1 KCanG that in cultivation associations, cannabis may only be cultivated collectively by members. Cultivation associations may only assign tasks directly connected to the collective self-cultivation or distribution of cannabis to marginally employed persons within the meaning of § 8 para. 1 SGB IV if these persons are members of the cultivation association. Other paid employees—regardless of whether they are members or non-members—or other non-members may, pursuant to § 17 para. 1 sentence 3 KCanG, only be entrusted with tasks that are not directly connected to the collective self-cultivation or distribution of cannabis.
However, in the court’s correct view, this does not mean that board members of cultivation associations may only be compensated within the framework of marginal employment.
A Clear Distinction Between Cultivation and Organizational Activities
The court draws a clear distinction between activities directly connected to the collective self-cultivation or distribution of cannabis and those of an organizational nature, such as serving as a board member. No statutory compensation cap is provided for organizational functions. As long as the board members and other persons authorized to represent a cultivation association fulfill their obligation as members to actively participate in the collective self-cultivation pursuant to § 17 para. 2 KCanG—and in this respect are compensated at most as marginally employed persons—the purpose and intent of the law do not preclude them from also assuming further activities not directly connected to the cultivation of cannabis and receiving compensation exceeding the marginal employment threshold of § 8 para. 1 SGB IV for this work.
No Administrative Restructuring of the Law
The court expressly rejects any contrary interpretation of the law. It makes unmistakably clear that the limits of permissible judicial development of the law are exceeded when clearly recognizable—possibly even expressly documented in the wording—legislative decisions are altered, or new rules are created without sufficient grounding in statutory provisions. Where the democratically legitimized legislature has made an unambiguous decision, this decision must not be altered based on personal legal-policy views or replaced by a judicial solution.
The Prohibition of Commercialization
Particularly persuasive is that the Hamburg Administrative Court does not overextend the legislative objective of non-commercialization of cultivation, which authorities frequently invoke. The court works out that this concern relates to preventing the outsourcing of actual cultivation to external commercial structures—not to a de facto prohibition of appropriate compensation for organizational association responsibility. In doing so, the court refers once again to the explanatory memorandum of the law, specifically to the fact that those activities with no direct connection to the cultivation and harvesting process are subject to no restrictions—neither regarding the amount of compensation or the scope of employment, nor regarding the group of persons permitted to perform these activities.
During the legislative process, the legislature had the discussion of a compensation prohibition on the table and decided against it. Attempting to reintroduce this assessment through the back door at a later stage is unlawful.
The “Non-Commerciality” Trump-Card Argument Also Fails
Also crucial is the clarification regarding non-commerciality, which licensing authorities like to use as a trump-card argument through incorrect legal application. According to the court’s view, neither the legislative assessment expressed in § 1 No. 13 lit. a KCanG—that cultivation associations as registered non-commercial associations (i.e., non-profit associations / Idealvereine) may exclusively pursue purposes not directed at a commercial business enterprise—nor the resulting reference to the rules of §§ 21 ff. BGB necessarily imply a maximum limit for board member compensation.
§ 21 BGB merely requires that the association’s purpose may not be directed at a commercial business enterprise. However, a commercial business enterprise only exists where the association engages, in a systematic, lasting, and outwardly directed manner—that is, extending beyond the internal association sphere—in entrepreneurial activities aimed at obtaining financial benefits for the association or its members. By contrast, entrepreneurial activities undertaken by a non-commercial association in pursuit of its idealistic goals, but subordinated to the association’s non-commercial primary purpose, do not yet justify the classification as a commercial association. As long as the non-profit association (Idealverein) engages in entrepreneurial activities solely within this framework, or finances expenditures for high board compensation, for example through the collection of high membership fees, it remains a non-profit association within the meaning of § 21 BGB.
This assessment is of considerable significance far beyond the question of compensation. It also constitutes a decisive legal clarification for many other areas, such as the question of the permissibility of third-party service structures.
Hamburg Reads the Law, Karlsruhe—Not So Much
Unlike the Karlsruhe Administrative Court, Case No. 7 K 1861/25, the Hamburg Administrative Court actually did look at the law in its decision and identified another fallacy that has been enforced by most state authorities and could have been avoided by simply reading the statute. Karlsruhe writes: “According to the principle of cost-coverage anchored in § 25 KCanG, cultivation associations under the Consumer Cannabis Act may exclusively pursue non-profit-oriented approaches.” Hamburg, by contrast, clarifies that the cost-coverage principle in § 25 KCanG—due to an amendment to the original draft legislation—only concerns the distribution of propagation material. Furthermore, the cost-coverage principle was expressly justified in the Federal Government’s draft bill of October 9, 2023 (BT-Drs. 20/8704, p. 121, still referring to the old draft version) on the grounds that “cultivation associations must in principle cover all material and personnel costs for their activities through collected membership fees or recurring contributions”.
The option of financing high expenditures by collecting correspondingly high membership fees is therefore generally open to cultivation associations. This point in particular once again shows how poorly many administrative argumentation patterns hold up. The fact that cultivation associations are not permitted to operate on a profit-oriented basis does not mean that every reasonable compensation is automatically suspect or impermissible. Anyone who turns the prohibition of commercial cultivation into a de facto compensation ban for board members replaces the wording of the law with their own political agenda.
Legal-Policy Classification
From a legal-policy perspective, the ruling is therefore far more than a single-case decision. It once again shows that criticism of administrative practice in dealing with cultivation associations is not unfounded. Instead of implementing the law in a practicable and legally compliant manner, numerous authorities have created—through excessive conditions and a restrictive reading covered by neither the wording nor the purpose of the provisions—a regulatory climate that hinders legal cultivation associations rather than enabling them. This fails to fulfill the legislature’s objective of combating the black market.
Significance for Practice
For practice, the ruling provides tailwind: board members who, in most German federal states, have until now been unable to receive proper compensation due to an unlawful interpretation of the law by state authorities, can now rely on a strong line of judicial reasoning.
This makes the founding of a Cannabis Club significantly more worthwhile going forward—and this applies regardless of the implementation of any third-party service structures. For the recreational cannabis market, this is a milestone.
Olivia Ewenike, LL.M. (Compliance), Cannabis Law | Compliance | Criminal Law, Attorney for Cultivation Associations
