Summary
- Royal Charter No. 1 of 2024 gives the Gelephu Mindfulness City (GMC) "independent judicial authority including final adjudication" (Art. 1) and requires the GMC Authority (GMCA) to establish an independent judiciary and a legal system "based on common law principles" (Art. 4).
- Until separate judicial bodies exist, the GMCA administers and enforces GMC law (Application of Laws Act 2024, s. 11), and the substantive law is the received common law and equity (s. 3), subject to GMC enactments.
- Every GMC Act defines "court" as "such judicial body that the Druk Gyalpo may designate for the purposes of that provision" (Companies Act 2025 s. 4(1); Income Tax Act 2025 s. 2; Employment Act 2025 s. 2(1); Financial Services Act 2025 s. 258; Sale of Goods Act 2026 s. 1A(1)).
- The Acts assume a tiered court structure: the Employment Act refers to "a court that is not the lowest level of court" (s. 117), the Income Tax Act to a "Court of First Appeal" with a further appeal beyond it (s. 81), and the Financial Services Act to "a Court of first instance in the GMC" (s. 212).
- Specialised first-tier bodies already exist in statute: the Commissioner for Labour (Employment Act Part 15), the Controller of Work Passes and an Appeal Board (Foreign Workforce Act Part 5), and the designated officer for tax appeals (Income Tax Act Part 18).
- Arbitration agreements are expressly outside the Unfair Contract Terms Act 2026 (s. 13).
Why this question matters
An investor's first legal question about a new jurisdiction is rarely about tax. It is: if something goes wrong, where do I go, who decides, and can I enforce the result? This article sets out what the published GMC sources say about that question. It cites only the Royal Charter, the Application of Laws Act 2024 and the GMC Acts as listed by the Gelephu Mindfulness City Authority.
The constitutional foundation: the Royal Charter
Royal Charter No. 1 of 2024, granted by the Druk Gyalpo on 10 February 2024, is the source of every GMC law. Article 1 declares GMC "a fully independent and autonomous region in the Kingdom of Bhutan" with executive, legislative and independent judicial authority, "including final adjudication". That last phrase is significant: it contemplates that the highest court for GMC matters sits within GMC, rather than appeals running to a court outside the region.
Article 3 establishes the GMCA as the highest decision-making body, with corporate legal personality, chaired by the Druk Gyalpo. Article 4 directs the GMCA to establish administrative and regulatory bodies, including a central bank, and "an independent judiciary and legal system based on common law principles"; it also gives the GMCA power to enact laws, which require Royal Assent. Article 7 provides that the Charter may be amended only by Royal Decree.
Every GMC Act recites that it is made "in exercise of the powers under Article 4(2) of the GMC Royal Charter No. 1 of 2024, and with the assent of the Druk Gyalpo". The judicial system is therefore constitutionally mandated to be independent, GMC-based, common-law in character, and final.
The applicable law: Application of Laws Act 2024
The Application of Laws Act 2024 (Law No. 1 of 2024, amended in 2025 and 2026) supplies the legal system's content while GMC's own statute book grows.
Section 3 applies the common law and the rules of equity as received from established common law jurisdictions, so far as suited to GMC's circumstances and subject to GMC enactments. A GMC court deciding a contract, tort, trust or equitable claim therefore applies a mature body of common law, which is why the Sale of Goods Act 2026 can preserve "the rules of the common law, including the law merchant" (s. 62(2)).
Section 4 and Schedule A apply the listed statutes, drawn from an established common law jurisdiction, with modifications. After the 2025 and 2026 amendments, the list includes the Contracts (Rights of Third Parties) Act 2007, the Electronic Transactions Act 2010, the Insolvency, Restructuring and Dissolution Act 2018, the Interpretation Act 1965 and the Personal Data Protection Act 2012.
Section 7 sets a hierarchy for gaps: the GMCA determines matters not covered; Bhutanese law applies by default generally; the applied general law is presumptive for civil and commercial matters; and the applied general law prevails over the applied financial services rules in a conflict unless the GMCA decides otherwise. Section 10 gives the GMCA a power to remove difficulties.
Section 11 is the provision on institutions: until separate executive and judicial bodies are established, the GMCA administers and enforces GMC law. The identity of the judicial body for any given provision is fixed by designation by the Druk Gyalpo, as the Acts themselves confirm.
What the Acts say about "court"
The GMC Acts are consistent. Each defines "court", in relation to any provision, as "such judicial body that the Druk Gyalpo may designate for the purposes of that provision". That formula appears in the Companies Act 2025 (s. 4(1)), the Income Tax Act 2025 (s. 2), the Employment Act 2025 (s. 2(1)), the Employment of Foreign Workforce Act 2025 (s. 2), the Sale of Goods Act 2026 (s. 1A(1)) and the Financial Services Act 2025 (s. 258). The Employment Act adds that "the body or agency that the Druk Gyalpo appoints as the court" may impose the full punishment prescribed by that Act (s. 129(2)), and the Foreign Workforce Act provides that a court has jurisdiction to try any offence under it (s. 26).
The drafting is deliberately flexible: different bodies may be designated for different provisions, and the Acts do not name them. Anyone told that a particular named court in GMC has jurisdiction over a matter should ask for the designation instrument.
The court structure the Acts assume
The Acts reveal the court structure the drafters provide for:
| Provision | What it assumes |
|---|---|
| Employment Act s. 117(1), appeal from the Commissioner for Labour lies "to a court that is not the lowest level of court" | At least two levels of court |
| Employment Act s. 118(2), sale of immovable property to enforce a Commissioner's order only "by a court that is not the lowest level of court" | A lower court with limited enforcement powers |
| Income Tax Act s. 81(2), appeal from the designated officer to "the court first hearing appeals from the designated officer (called in this Part the Court of First Appeal)" | A first appellate court for tax |
| Income Tax Act s. 81(5), a further right of appeal "as exists in the case of decisions made by the Court of First Appeal in the exercise of its original civil jurisdiction" | The Court of First Appeal also has original civil jurisdiction, and there is a further tier above it |
| Income Tax Act s. 80(7), costs may be "assessed by a registrar of the courts" | A court registry |
| Income Tax Act s. 81(3), procedure and costs "as provided for in any rules governing court procedure made under written law" | Court rules made under written law |
| Financial Services Act s. 212(1), "A Court of first instance in the GMC may issue an order" for entry of premises | A first-instance court with warrant-type powers |
The "Court of First Appeal" is the label the Income Tax Act attaches to whichever court first hears appeals from the designated officer; "court of first instance" is used in the same way.
Where disputes are decided today
Several statutory decision-makers are already in place, and commercial parties will meet them first.
Employment disputes: the Commissioner for Labour
The Commissioner may inquire into and decide any dispute between an employee and employer arising from the contract of service or the Employment Act, and order payment "without limitation of the amount" (s. 115(1)), capped at $20,000 for employees in managerial or executive positions (s. 115(3A)). Claims relating to termination must be lodged within 6 months (s. 115(2)). Proceedings are private, informal and decided "according to equity, good conscience and the merits of the case without regard to technicalities" (s. 119(2), (3)); neither party may be represented by an advocate or solicitor (s. 120). Orders are enforced by a court "in the same manner as a judgment of that court" (s. 118(1)). Appeal lies within 14 days to a court above the lowest level (s. 117). The Act preserves court jurisdiction (s. 122) and civil suits on the contract (s. 132), so an employment contract claim may also be brought in court directly.
Work pass matters: the Controller and the Appeal Board
Under the Employment of Foreign Workforce Act 2025, the Controller of Work Passes determines "prescribed infringements" in private, on the balance of probabilities, without lawyers (s. 25C). Appeal lies within 14 days to an Appeal Board of at least three persons, chaired by a designated officer, which sets its own procedure and "must be independent in the performance of its functions" (ss. 25G, 25H); its decision is final (s. 25C(8)). Decisions on the grant or revocation of a pass are appealable only to the designated officer, whose decision is final, and are excluded from judicial review "except in regard to any question relating to compliance with any procedural requirement of this Act" (s. 7(10), (11)). This is an express, statutory limit on court supervision of one category of administrative decision.
Tax disputes: objection, designated officer, Court of First Appeal
The Income Tax Act 2025 sets out a complete appellate chain in Parts 17 and 18:
- Objection to the Comptroller. A person disputing an assessment gives written notice of objection within 2 months (companies) or 30 days (others) of service of the notice (s. 76(2), (3)). If the parties cannot agree, the Comptroller issues a notice of refusal to amend (s. 76(6)(b)).
- Appeal to the designated officer. Notice of appeal within 30 days of the refusal, and a petition stating the grounds within a further 30 days (s. 79(1)); the notice is deemed withdrawn if no petition follows (s. 79(3)). Late appeals may be permitted for absence, sickness or other reasonable cause (s. 79(11)). The appellant may be represented by an advocate and solicitor or an accountant "but by no one else" (s. 80(2)). The onus of proving the assessment excessive is on the appellant (s. 80(4)). The designated officer has a court's powers over witnesses and contempt (s. 80(5)(c)), may require security for tax (s. 80(9)), and may confirm, reduce, increase or annul the assessment (s. 80(10)). Hearings are private unless either party applies for a public hearing (s. 83).
- Appeal to the Court of First Appeal. Where the tax in dispute exceeds $200, either side may appeal "upon any question of law or of mixed law and fact" (s. 81(2)); procedure and costs follow court rules made under written law (s. 81(3)). The designated officer may also state a case on a question of law for the court's opinion (s. 82).
- Further appeal. A further appeal lies from the Court of First Appeal to the same extent as from its original civil decisions (s. 81(5)).
Tax remains payable within one month of the notice of assessment despite any objection or appeal (s. 85(1)), and assessments not appealed in time are "final and conclusive" (s. 84(1)). The Comptroller may sue for tax "by way of a specially endorsed originating claim" (s. 89(1)) and may direct that a person about to leave GMC without paying tax be prevented from leaving (s. 86).
Companies, partnerships and financial services
The Companies Act 2025 refers to the court throughout, for example the court-approval route for a reduction of capital (s. 78G) alongside the solvency-statement route for private companies (s. 78B), and the Partnership Act 2026 provides for court-ordered dissolution of a partnership on grounds including prejudicial conduct or that it is just and equitable (s. 35). The Business Names Registration Act 2026 (s. 31) and Limited Partnerships Act 2026 (s. 30) both bar a non-compliant business from enforcing its contracts, subject to relief from the court. The Financial Services Act 2025 gives the court extensive powers on the application of the Regulator (GFSO), including injunctions (ss. 236–238), restitution orders (ss. 239, 240), orders in aid of investigations (s. 237), and entry orders from "a Court of first instance in the GMC" (s. 212). In every case, the body exercising the power is the one designated under the "court" definition.
Arbitration
The Unfair Contract Terms Act 2026 provides that its controls on exemption clauses do not catch arbitration agreements (s. 13). An agreement to arbitrate in a GMC contract is therefore not vulnerable to the reasonableness test as an "exclusion" of the right to sue.
The common law received under s. 3 recognises agreements to arbitrate as contracts, and s. 7 makes the applied general law presumptive for civil and commercial matters where GMC law is silent. A GMC court asked to stay proceedings in favour of arbitration, or to enforce an award made in or outside GMC, can rely on common law precedents from any common law jurisdiction on those questions. Article 5 of the Royal Charter empowers the GMCA to enter into free trade agreements.
Enforcement of judgments and awards
The published Acts address enforcement inside GMC. Orders of the Commissioner for Labour and administrative penalty notices under the Employment Act are enforced as judgments of the court (ss. 118(1), 126C(7)). Financial penalties under the Foreign Workforce Act carry interest "at the same rate as for a judgment debt" and are recoverable as a debt due to the GMCA (s. 25D). Tax is recoverable by suit and by exit restriction (Income Tax Act ss. 86, 89). The Financial Services Act allows the court, on the Regulator's application, to restrain a person from sending assets "out of the jurisdiction of the Court or out of the GMC" (s. 237).
On the two questions investors ask most, whether a GMC judgment will be recognised abroad, and whether a foreign judgment or arbitral award will be recognised in GMC, the received common law under s. 3 supplies the rules on the effect of foreign judgments, and GMC courts can rely on common law precedents from any common law jurisdiction in applying them. Cross-border contracts should, as in any jurisdiction, be structured with enforcement in mind: security, escrow, guarantees from entities in jurisdictions with established enforcement regimes, and assets located where the counterparty can reach them.
Practical steps for contracting parties
- Choose governing law expressly. GMC law brings the received common law and equity (s. 3) plus the GMC Acts; say so in terms.
- Draft the forum clause to the Acts. Refer to "the courts of GMC" or to the judicial body designated under the relevant Act.
- Consider arbitration. It is outside UCTA (s. 13); choose the seat, rules and enforcement assets deliberately.
- Use statutory first-tier bodies where they exist. Employment claims go to the Commissioner within 6 months of termination; tax objections within 30 days or 2 months; work pass appeals within 14 days.
- Diary the tax timeline. Objection, 30-day notice of appeal, 30-day petition, and the $200 threshold for the Court of First Appeal (Income Tax Act ss. 76, 79, 81).
- Structure for enforcement. Take security or guarantees reachable where the counterparty's assets are located.
- Keep evidence in a form a common law court expects. Written contracts, signed statements and contemporaneous records will carry weight under the received common law.
Frequently asked questions
Does GMC have its own courts?
The Royal Charter requires an independent judiciary with final adjudication within GMC (Arts. 1 and 4). The Acts define "court" as the judicial body the Druk Gyalpo designates for each provision, and the Application of Laws Act provides that the GMCA administers and enforces the law until separate judicial bodies are established (s. 11).
What law will a GMC court apply to my contract?
The common law and equity as received from established common law jurisdictions, so far as suited to GMC and subject to GMC enactments (Application of Laws Act s. 3), together with GMC statutes such as the Sale of Goods Act 2026 and the Unfair Contract Terms Act 2026, and the applied statutes listed in Schedule A.
Can I include an arbitration clause in a GMC contract?
Yes. Arbitration agreements are expressly outside the Unfair Contract Terms Act 2026 (s. 13), so the clause is not tested for reasonableness. Choose the seat and rules with the place of enforcement in mind.
How do I appeal a tax assessment in GMC?
Object in writing to the Comptroller within 2 months (companies) or 30 days (others) (s. 76(3)); if refused, lodge a notice of appeal to the designated officer within 30 days and a petition within a further 30 days (s. 79(1)); then, if the tax exceeds $200, appeal on law or mixed law and fact to the Court of First Appeal (s. 81(2)), with a further appeal beyond (s. 81(5)).
Can I challenge a work pass refusal in court?
Review is limited to procedure. Section 7(11) of the Employment of Foreign Workforce Act 2025 excludes judicial review of the Controller's and designated officer's decisions under s. 7 except on compliance with the Act's procedural requirements. The appeal route is to the designated officer, whose decision is final (s. 7(10)).
Will a foreign judgment be enforced in GMC?
The received common law under s. 3 of the Application of Laws Act 2024 includes the rules on the effect of foreign judgments, and GMC courts can rely on common law precedents from any common law jurisdiction in applying them. Structure cross-border transactions with the place of enforcement in mind.
Key takeaways
- GMC's judicial power is constitutionally independent and final (Charter Arts. 1, 4); its institutions are designated by the Druk Gyalpo provision by provision.
- The substantive law is common law (Application of Laws Act s. 3) plus the GMC Acts; the GMCA administers and enforces it in the interim (s. 11).
- Specialised first-tier decision-makers for employment, work passes and tax already operate with short, strict deadlines.
- The Acts provide for a tiered court system (a lowest court, a Court of First Appeal with original civil jurisdiction, and a further appeal).
- Arbitration clauses are valid and outside UCTA (s. 13), and the received common law governs the effect of foreign judgments.
This article is general information about the law of the Gelephu Mindfulness City Special Administrative Region as at the date above. It is not legal advice and does not create a lawyer–client relationship.
You may contact Basnet Law at basnet@basnetgmc.com or office@basnetgmc.com for any legal queries related to GMC.
References
- Royal Charter No. 1 of 2024, Arts. 1, 3, 4, 5, 7
- Application of Laws Act 2024 (Law No. 1 of 2024), ss. 3, 4, 7, 10, 11; Schedule A
- Companies Act 2025 (Law No. 1 of 2025), ss. 4(1), 78B, 78G
- Income Tax Act 2025 (Law No. 6 of 2025), ss. 2, 76, 79, 80, 81, 82, 83, 84, 85, 86, 89
- Employment Act 2025 (Law No. 3 of 2025), ss. 2(1), 115, 117, 118, 119, 120, 122, 126C, 129(2), 132
- Employment of Foreign Workforce Act 2025 (Law No. 4 of 2025), ss. 2, 7(10)–(11), 25C, 25D, 25G, 25H, 26
- Financial Services Act 2025 (Law No. 5 of 2025), ss. 212, 236, 237, 238, 239, 240, 258
- Sale of Goods Act 2026 (Law No. 5 of 2026), ss. 1A(1), 62(2)
- Unfair Contract Terms Act 2026 (Law No. 6 of 2026), s. 13
- Partnership Act 2026 (Law No. 4 of 2026), s. 35; Limited Partnerships Act 2026 (Law No. 3 of 2026), s. 30; Business Names Registration Act 2026 (Law No. 1 of 2026), s. 31
