The Application of Laws Act 2024: How GMC's Legal System Is Built

The Gelephu Mindfulness City Special Administrative Region (GMC) is one of the most distinctive legal and administrative projects in modern governance. On 10 February 2024, His Majesty the Druk Gyalpo of Bhutan granted the GMC Royal Charter No. 1 of 2024, creating a special jurisdiction with substantial autonomy within the Kingdom of Bhutan. The Application of Laws Act 2024 (GMC Law No. 1 of 2024) followed, coming into operation on 26 December 2024 and giving the region a working body of law from its first day. The Act has since been amended twice, by the Application of Laws (Amendment) Act 2025 and the Application of Laws (Amendment) Act 2026, and GMC has enacted its own Companies, Customs, Employment, Employment of Foreign Workforce, Financial Services and Income Tax Acts in 2025 and six further Acts in 2026.

The GMC represents a pioneering approach to urban development and governance, blending Bhutanese cultural values of mindfulness and sustainability with internationally recognized legal frameworks designed to attract global investment and foster innovation. The strategy selects elements from an established common law jurisdiction and an established international financial centre to create a hybrid system built for legal certainty, workable business regulation and efficient dispute resolution, while keeping the region aligned with Bhutan's national ethos.

The Application of Laws Act 2024 sets out which external legal frameworks apply, how they apply, how they are modified for local conditions, how conflicts between legal sources are resolved, and how specialised institutions are developed. This article walks through that architecture as it stands in 2026, section by section, and explains what it means for businesses, investors and residents of GMC.

Historical and Constitutional Context

Bhutan's Legal Evolution

The Kingdom of Bhutan has undergone remarkable legal transformation in recent decades. Transitioning from a traditional legal system based primarily on Buddhist principles and customary law to a constitutional monarchy in 2008, Bhutan has methodically developed a modern legal framework while preserving its cultural identity. The creation of the GMC represents the latest evolution in this journey, introducing a specialized economic and administrative zone with significant legal autonomy.

Bhutan's unique development philosophy, centered around Gross National Happiness rather than purely economic metrics, has influenced its approach to modernization and global integration. The GMC concept is an attempt to harmonise established international practice in commercial and financial regulation with Bhutan's commitment to sustainable and mindful development.

The Royal Charter as Constitutional Foundation

The GMC Royal Charter No. 1 of 2024, granted by His Majesty the Druk Gyalpo on 10 February 2024, is the constitutional foundation of the Special Administrative Region. Article 1 describes GMC as a fully independent and autonomous region in the Kingdom of Bhutan with executive, legislative and independent judicial authority, including final adjudication. Article 3 establishes the GMC Authority (GMCA) as the highest decision-making body, chaired by the Druk Gyalpo, while Article 4 sets out its powers. Article 6 places security under the Armed Forces of Bhutan and Article 7 provides that the Charter may be amended only by Royal Decree.

Article 4(1) empowers the GMC Authority to establish administrative, regulatory, and judicial bodies, setting the stage for institutional development. Article 4(2) grants the Authority legislative powers to enact laws for the governance of the GMC, with Royal Assent. Every GMC Act, from the Application of Laws Act 2024 to the Unfair Contract Terms Act 2026, is made in exercise of this power.

The Charter's provisions reflect careful constitutional engineering, balancing autonomy for the GMC with integration into the broader Bhutanese state structure. This approach follows models of special administrative regions and economic zones in other jurisdictions while adapting them to Bhutan's unique constitutional context.

The GMC Authority: Powers and Functions

Institutional Structure and Governance

The GMC Authority, established under Article 3 of the Royal Charter, is the central governance institution for the Special Administrative Region. The Application of Laws Act defines the Authority's powers and provides the governance framework under which the region's regulators and registries have since been created.

Section 11 of the Act provides that, until appropriate executive and judicial bodies exist, the GMC Authority carries out all executive and judicial functions arising from the Act. The Authority has used that power to build out the institutions: the Gelephu Corporate Registration Office (GCRO) registers companies under the Companies Act 2025, the Gelephu Financial Services Office (GFSO) is the Regulator under the Financial Services Act 2025, the Comptroller of Income Tax administers the Income Tax Act 2025, the Controller of Work Passes administers the Employment of Foreign Workforce Act 2025, and the Director-General of Customs administers the Customs Act 2025.

Legislative Powers

The Authority possesses extensive legislative powers under both the Royal Charter and the Application of Laws Act. Section 6 of the Act expressly preserves the Authority's powers to enact laws (including subsidiary legislation) for the governance of the GMC, "including and not limited to matters relating to land, taxation or crime." This is the provision under which the whole 2025 and 2026 statute book was passed: the Companies Act 2025, Customs Act 2025, Employment Act 2025, Employment of Foreign Workforce Act 2025, Financial Services Act 2025, Income Tax Act 2025, Business Names Registration Act 2026, Limited Liability Partnerships Act 2026, Limited Partnerships Act 2026, Partnership Act 2026, Sale of Goods Act 2026 and Unfair Contract Terms Act 2026.

The legislative powers extend to both primary legislation and subsidiary instruments such as regulations, orders, and by-laws. Section 2 of the Act defines "subsidiary legislation" to include "any order in council, proclamation, rule, regulation, order, notification, by-law or other instrument made under any Act, Ordinance or other lawful authority and having legislative effect." This broad definition provides the Authority with multiple legislative tools for different regulatory purposes.

The Act also empowers the Authority to amend Schedules A and B, which list the enactments and financial services rules that apply in the GMC. In practice the changes so far have been made by amendment Acts: the 2025 amendment deleted six Schedule A items and inserted section 5A and Schedule C (the Kingdom of Bhutan's sales tax, customs and excise laws), and the 2026 amendment, operative 15 June 2026, deleted two more Schedule A items as GMC's own Sale of Goods Act 2026 and Unfair Contract Terms Act 2026 came into operation.

Regulatory and Executive Functions

The regulatory and executive functions that the Act first placed with the GMC Authority are now exercised through the bodies and officers created under the 2025 Acts:

• Company registration and corporate governance oversight: the Registrar of Companies within the Gelephu Corporate Registration Office (GCRO)
  
  
• Employment regulation and foreign workforce management: the Employment Act 2025 and the Controller of Work Passes under the Employment of Foreign Workforce Act 2025
  
  
• Tax administration and collection: the Comptroller of Income Tax under the Income Tax Act 2025
  
  
• Immigration and customs control: the Director-General of Customs under the Customs Act 2025, with the applied Immigration Act 1959 sitting alongside the work pass regime
  
  
• Financial services licensing and supervision: the Gelephu Financial Services Office (GFSO), the single regulator for banking, capital markets, payments, insurance and digital assets
  
  
• Data protection: the applied Personal Data Protection Act 2012, administered by the GMC Authority
  
  
• Land and property: land is made available on lease, with property tax under the applied Property Tax Act 1960
  
  

The Act provides that references in applied laws to regulatory authorities of the source jurisdictions are read as references to the GMC Authority until it establishes other bodies and appoints officers under Article 4(1) of the Royal Charter. That is exactly what has happened: the GCRO, GFSO and the statutory officers named above now hold those functions.

Section 8 empowers the Authority to issue Guidance with respect to interpretation and application of laws, resolution of conflicts between different legal sources, and other matters. This guidance power provides an important regulatory tool for clarifying legal requirements and ensuring consistent application of the complex hybrid legal framework.

Judicial Functions

Section 4(4)(b) provides that references to courts in applied Schedule A enactments refer to the GMC Authority "unless and until the GMC Authority establishes a separate judiciary under Article 4(1) of the Royal Charter." Section 5(4)(b) contains a parallel provision for references to courts in Schedule B rules.

Article 1 of the Charter gives GMC independent judicial authority with final adjudication, and Article 4 directs the GMCA to establish an independent judiciary. The 2025 Acts are precise about designation: each of the Companies Act 2025, Financial Services Act 2025, Income Tax Act 2025 and Employment Act 2025 defines "court" as the judicial body that the Druk Gyalpo designates for the purposes of the provision. Regulatory decisions carry statutory appeal routes; a refusal to register a company, for example, can be appealed to the designated officer within 30 days (Companies Act 2025, s. 20(3)).

Contracts for GMC business should carry an express GMC governing-law clause and a dispute-resolution clause; arbitration and security remain available in the ordinary way.

Conflict Resolution and Gap-Filling Powers

Section 7 empowers the Authority to determine the applicable law for matters not governed by a GMC enactment, the received common law, the Schedule A enactments, the Schedule B financial services rules or the Schedule C laws. This determination power is the mechanism for addressing gaps in the legal framework.

Section 10 further authorises the Authority to "modify or substitute" provisions in applied enactments "where it considers it necessary or expedient for the purpose of removing any difficulty or conflict, whether arising from local conditions or circumstances or otherwise." This broad power enables the Authority to address unforeseen complications in the application of foreign legal provisions to the GMC context.

These conflict resolution and gap-filling powers provide essential flexibility in implementing a complex hybrid legal system, allowing for pragmatic adjustments while maintaining the overall coherence of the legal framework.

The Hybrid Legal System: Three Pillars

Beneath GMC's own Acts, the received law rests on three pillars, with a fourth (Schedule C) added in 2025. Together they combine elements from different legal traditions into a hybrid system suited to business.

Pillar 1: The Received Common Law

Integration Mechanism

Section 3(1) of the Application of Laws Act incorporates the common law of an established common law jurisdiction (the parent jurisdiction), as it evolves over time, into the law of the GMC. This incorporation is subject to four crucial qualifications:

• The common law applies "so far as it is applicable to the circumstances of the GMC"
  
  
• It is subject to "such modifications as the circumstances of the GMC may require"
  
  
• It is subject to "any amendment by a GMC law"
  
  
• It is subject to any amendment by an enactment of the parent jurisdiction, unless specifically disapplied by the GMC Authority
  
  

These qualifications create a dynamic relationship between the parent jurisdiction's common law and the GMC context, allowing for both automatic updates as that jurisprudence evolves and specific adaptations to GMC circumstances.

Scope and Content

Section 3(2) clarifies that the received common law includes the common law of England and the principles and rules of equity, so far as they formed part of the parent jurisdiction's law immediately before 12 November 1993. This provision establishes continuity with the Anglo-Commonwealth legal tradition while benefiting from the parent jurisdiction's refinements and adaptations of these principles to an Asian context.

The reference to 12 November 1993 corresponds to the date on which the parent jurisdiction's own reception statute formally defined the extent to which English law applied there. This specific historical reference point provides clarity regarding which aspects of English common law are incorporated into GMC law.

The incorporation of principles and rules of equity alongside common law provides the GMC with a complete system of judge-made law addressing both legal and equitable rights and remedies. This dual system, characteristic of jurisdictions in the English legal tradition, provides flexible remedial mechanisms particularly valuable in commercial contexts.

Dynamic Incorporation

Section 3(3) establishes that if a particular rule or principle of the parent jurisdiction's common law is abolished or modified there, that abolition or modification takes effect in the GMC, subject to subsection (1). This provision creates an automatic updating mechanism, ensuring that the GMC's common law remains aligned with the parent jurisdiction's evolving jurisprudence without requiring constant legislative intervention.

This dynamic incorporation approach differs from the static reception of foreign law found in some legal systems, where foreign law is received as it existed at a particular historical moment. The GMC's approach creates an ongoing relationship with the parent jurisdiction's legal development, allowing the GMC to benefit from its continued refinements and adaptations while retaining the ability to diverge where appropriate.

Advantages of the Received Common Law

The selection of this received common law as the foundation for the GMC's legal system offers several strategic advantages:

• Commercial Sophistication: The received common law is commercially sophisticated and addresses complex business transactions, corporate governance, financial services, and international commerce.
  
  
• Asian Context: The parent jurisdiction's adaptation of English common law principles to an Asian context provides a model for the GMC's own contextual adaptation process.
  
  
• International Recognition: The parent jurisdiction's judiciary and legal system enjoy strong international recognition and credibility, particularly in commercial matters.
  
  
• Legal Certainty: The extensive body of case law from established common law jurisdictions provides clear precedents for many commercial situations, enhancing legal certainty for businesses operating in the GMC.
  
  
• Judicial Methodology: The common law methodology, with its emphasis on precedent, incremental development, and practical reasoning, provides flexibility to address new situations while maintaining consistency.
  
  

This strategic choice positions the GMC to develop a sophisticated commercial law system while benefiting from the parent jurisdiction's decades of experience in adapting common law principles to an Asian context.

Pillar 2: Applied Statutory Enactments

Selection and Incorporation

Section 4 and Schedule A of the Act originally applied eighteen enactments drawn from the parent jurisdiction. After the 2025 and 2026 amendments, ten remain. The other eight were deleted as GMC repealed and re-enacted them, with amendments, as its own Acts: the Companies Act 2025, Customs Act 2025, Employment Act 2025, Employment of Foreign Workforce Act 2025 and Income Tax Act 2025 (deletions effective from 26 December 2024), and the Sale of Goods Act 2026 and Unfair Contract Terms Act 2026 (deletions effective 15 June 2026); the Goods and Services Tax Act was deleted and replaced by the applied Bhutanese sales tax laws in Schedule C. The pattern is deliberate: GMC starts with a borrowed statute, then replaces it with a GMC Act that keeps the structure but localises the content, most visibly by reading every "$" as United States dollars.

The statutes, applied or since re-enacted as GMC Acts, address the following key areas:

Business Formation and Operation

• Companies Act 2025 (GMC Law No. 1 of 2025), which repealed and re-enacted with amendments the Companies Act 1967 formerly in Schedule A: regulates company formation, governance, management, shareholder rights and corporate finance, with the register kept by the Registrar of Companies within the GCRO
  
  
• Insolvency, Restructuring and Dissolution Act 2018 (Schedule A, item 10): Addresses business failure, restructuring options, and liquidation procedures
  
  

Commercial Transactions

• Contracts (Rights of Third Parties) Act 2007 (Schedule A, item 2): Modifies traditional privity of contract rules to allow specified third parties to enforce contractual terms
  
  
• Sale of Goods Act 2026 (GMC Law No. 5 of 2026), in operation from 15 June 2026 in place of the formerly applied Sale of Goods Act 1979: Regulates contracts for the sale of goods, including terms, conditions, warranties, and remedies
  
  
• Unfair Contract Terms Act 2026 (GMC Law No. 6 of 2026), in operation from 15 June 2026 in place of the formerly applied Unfair Contract Terms Act 1977: Restricts the ability to exclude or limit liability through contract terms, particularly in standard form contracts
  
  
• Electronic Transactions Act 2010 (Schedule A, item 4): Provides legal recognition for electronic records, signatures, and contracts
  
  

Employment

• Employment Act 2025 (GMC Law No. 3 of 2025), which repealed and re-enacted with amendments the Employment Act 1968: Establishes basic employment terms, conditions, and protections
  
  
• Employment of Foreign Workforce Act 2025 (GMC Law No. 4 of 2025), which repealed and re-enacted with amendments the Employment of Foreign Manpower Act 1990: Regulates the employment of foreign workers through work passes issued by the Controller of Work Passes
  
  

Taxation

• Sales tax: the Goods and Services Tax Act 1993 was deleted from Schedule A in 2025; the Kingdom of Bhutan's sales tax, customs and excise laws apply in GMC instead under section 5A and Schedule C
  
  
• Income Tax Act 2025 (GMC Law No. 6 of 2025), which repealed and re-enacted with amendments the Income Tax Act 1947: Provides the framework for corporate and personal income taxation, with a 15% company rate and 0% for non-citizen individuals to 31 December 2030
  
  
• Property Tax Act 1960 (Schedule A, item 14): Establishes taxation of real property
  
  
• Stamp Duties Act 1929 (Schedule A, item 17): Imposes duties on specified instruments and transactions
  
  
• Immigration and Customs
• Immigration Act 1959 (Schedule A, item 8): Regulates entry, exit, and residence of non-citizens, alongside the work pass regime of the Employment of Foreign Workforce Act 2025
  
  
• Customs Act 2025 (GMC Law No. 2 of 2025), which repealed the formerly applied Customs Act 1960: Creates the GMC customs territory, the Director-General of Customs and the duty structure for goods imported into the customs territory
  
  

Data Protection and Information

• Personal Data Protection Act 2012 (Schedule A, item 13): Regulates collection, use, and disclosure of personal data​
  
  
• Spam Control Act 2007 (Schedule A, item 16): Regulates unsolicited commercial electronic messages
  
  
• Official Secrets Act 1935 (Schedule A, item 12): Protects official information and state secrets
  
  

Legal Interpretation

• Interpretation Act 1965 (Schedule A, item 11): Provides rules and principles for interpreting legislation

This selection creates a statutory framework for business operations while leaving other areas (such as criminal law, family law, and social welfare) to Bhutanese law by default under Section 7(2) of the Act.

Application Mechanism

Section 4(1) provides that the Schedule A enactments "as amended from time to time" apply in the GMC. This dynamic incorporation approach ensures that the GMC benefits from ongoing refinements and updates to these laws in the parent jurisdiction, similar to the approach for common law.

Like the common law incorporation, this statutory incorporation is subject to four qualifications under Section 4(3):

• The enactments apply "so far as it is applicable to the circumstances of the GMC"
  
  
• They are subject to "such modifications as the circumstances of the GMC may require"
  
  
• They are subject to "any amendment by a GMC law"
  
  
• They are subject to any amendment by an enactment of the parent jurisdiction, unless specifically disapplied by the GMC Authority
  
  

These qualifications provide flexibility for adaptation while maintaining alignment with the parent jurisdiction's legislative developments.

Section 4(5) further provides that if an enactment specified in Schedule A is repealed or modified in the parent jurisdiction, that repeal or modification takes effect in the GMC, subject to subsection (3). This automatic updating provision ensures ongoing alignment with the parent jurisdiction's
statutory framework while preserving the GMC's ability to diverge where appropriate.

Modifications

Section 4(4) specifies crucial modifications to these incorporated enactments:

• References to the parent jurisdiction's authorities, boards, licensing officers, or authorized officers are interpreted as references to the GMC Authority "unless and until the GMC Authority establishes other administrative and regulatory bodies and agencies and appoints such officers or persons under Article 4(1) of the Royal Charter"
  
  
• References to the parent jurisdiction's courts are interpreted as references to the GMC Authority "unless and until the GMC Authority establishes a separate judiciary under Article 4(1) of the Royal Charter"
  
  
• References to other laws of the parent jurisdiction are interpreted as references to equivalent GMC laws "unless the circumstances require otherwise"
  
  
• "Such other modifications as may be prescribed by the GMC Authority from time to time"
  
  

These modifications address the practical challenges of implementing foreign statutes in a new jurisdiction, particularly during the initial establishment phase.

Strategic Advantages

The incorporation of these specific statutes offers several strategic advantages:

• Legal Certainty: Businesses operating in the GMC can rely on well-established statutory frameworks with extensive jurisprudence and commentary.
  
  
• International Familiarity: The applied statutes, and the GMC Acts that re-enact them, come from a legal system that is internationally recognised and familiar to many multinational businesses, reducing legal adaptation costs.
  
  
• Regional Integration: The alignment with an established regional commercial law facilitates regional business integration and legal harmonization.
  
  
• Administrative Efficiency: The GMC can benefit from the parent jurisdiction's regulatory experience and administrative practices in implementing these laws.
  
  
• Coverage: The selected statutes gave GMC a working framework for business operations at the start, and GMC has since replaced the most important of them with its own Acts.
  
  

This approach allowed the GMC to focus its legislative resources on the areas that needed local content first, company law, employment, tax, customs and financial services, while relying on proven statutory frameworks for the rest.

Pillar 3: Applied Financial Services Laws

Strategic Selection

Section 5 and Schedule B apply the Financial Services and Markets Regulations 2015 of an established international financial centre and ten rulebooks made under them. This selection brought GMC a financial services regulatory framework designed for an international financial centre operating within a civil law state. Two developments now sit above section 5. The Financial Services Act 2025 (GMC Law No. 5 of 2025) repealed and re-enacted with amendments the Regulations specified in Schedule B, so the primary regulatory statute is a GMC Act, and it names the Gelephu Financial Services Office (GFSO) as the Regulator. GFSO has also begun issuing GMC rulebooks of its own, starting with the GEN Rulebook 2026 (Version 1.0, 7 May 2026); the rulebooks now in use are AML and Sanctions, Conduct of Business, Fund, General, Market Infrastructure and Prudential.

The source financial centre, established in 2015, is itself a common law jurisdiction created within a civil law state, with a financial regulatory framework based on UK models but adapted to regional circumstances. That transplant provided a recent and relevant model for the GMC's own approach.

The incorporation of these financial regulations alongside the received common law and applied statutes creates a unique hybrid that combines the strengths of two internationally recognized financial and commercial centers.

Scope of Incorporated Regulations

Schedule B applies the Financial Services and Markets Regulations 2015 (now re-enacted as the Financial Services Act 2025) along with ten rulebooks made under them:

• Anti-Money Laundering and Sanctions Rules and Guidance (AML): Establishes detailed requirements for preventing money laundering, terrorist financing, and sanctions violations.
  
  
• Captive Insurance Business Rules (CIB): Provides a regulatory framework for captive insurance companies, allowing businesses to self-insure within a regulated environment.
  
  
• Conduct of Business Rulebook (COBS): Establishes standards for business conduct by financial services firms, including requirements for fair treatment of customers, disclosure, and management of conflicts of interest.
  
  
• Fund Rules (FUNDS): Regulates the establishment, operation, and marketing of investment funds, including requirements for fund managers, administrators, and custodians.
  
  
• General Rulebook (GEN): Provides overarching regulatory requirements applicable across financial services sectors, including licensing standards, corporate governance requirements, and regulatory reporting obligations.
  
  
• Glossary (GLO): Defines key terms used throughout the regulatory framework, ensuring consistent interpretation.
  
  
• Market Infrastructure Rulebook (MIR): Regulates market infrastructure providers such as exchanges, clearing houses, and settlement systems.
  
  
• Market Rules (MKT): Establishes requirements for securities offerings, continuous disclosure by issuers, and market conduct.
  
  
• Prudential, Insurance Business (PIN): Establishes capital, solvency, and risk management requirements for insurance companies.
  
  
• Prudential, Investment, Insurance Intermediation and Banking Rules (PRU): Establishes capital, liquidity, and risk management requirements for banks, investment firms, and insurance intermediaries.
  
  

This framework covers the full spectrum of financial services activities and is the base on which GFSO licenses and supervises banking, capital markets, payments, insurance and digital assets.

Application Mechanism

• Similar to the Schedule A enactments, Section 5(1) provides that the Schedule B financial services laws "as amended from time to time" apply in the GMC. This dynamic approach keeps the underlying base aligned with the source financial centre's regulatory evolution, beneath the Financial Services Act 2025 and the GFSO rulebooks.
  
  
• Section 5(3) subjects this incorporation to qualifications similar to those for the Schedule A enactments:
  
  
• The regulations apply "so far as it is applicable to the circumstances of the GMC"
  
  
• They are subject to "such modifications as the circumstances of the GMC may require"
  
  
• They are subject to "any amendment by a GMC law"
  
  
• They are subject to any amendment in the source financial centre, which applies and forms part of the law of the GMC unless specifically disapplied by the GMC Authority
  
  

Section 5(5) further provides that if a law specified in Schedule B is repealed or modified in the source financial centre, that repeal or modification takes effect in the GMC, subject to subsection (3). This automatic updating mechanism keeps the applied base aligned with international standards as reflected in the source financial centre's evolving rules.

Modifications

Section 5(4) specifies crucial modifications to these incorporated regulations:

• References to the source financial centre's regulator are read as references to the GMC Authority "until the GMC Authority establishes the administrative and regulatory bodies and agencies and appoints such officers or persons under Article 4(1) of the Royal Charter"; that body is now GFSO
  
  
• References to the source financial centre's courts are read as references to the GMC Authority "until the GMC Authority establishes an independent judiciary under Article 4(1) of the Royal Charter"
  
  
• References to other laws of the source financial centre's host state are read as references to equivalent GMC laws "unless the circumstances require otherwise"
  
  
• References to other rules of the source financial centre are read as references to equivalent GMC laws "unless the circumstances require otherwise"
• "All references to Islamic finance are abolished"
  
  
• "Such other modifications as may be prescribed by the GMC Authority from time to time"
  
  
• These modifications adapt the applied financial services framework to the GMC context while maintaining its core regulatory approach. The specific abolishment of references to Islamic finance represents a policy choice to focus on conventional financial services, at least initially.
  
  

Strategic Advantages

The incorporation of these financial regulations offers several strategic advantages:

• Regulatory Sophistication: The applied framework provides a modern financial regulatory system aligned with international standards.
• Adaptability to New Context: As the product of a recently established financial centre that adapted UK regulatory models to its own regional context, the applied framework provided a relevant model for adaptation to the GMC context.
  
  
• Coverage: The applied rules provided detailed requirements across all major financial services sectors from the start, and GMC has since layered its own Financial Services Act 2025 and GFSO rulebooks over them.
  
  
• International Recognition: The applied regulatory framework aligns with international standards and has gained recognition from major financial regulators globally.
  
  
• Regional Distinctiveness: The pairing of an international financial centre's rulebook with the received common law creates a distinctive regulatory position that differentiates the GMC from other financial centres in the region.
  
  

This positions the GMC as a specialised financial centre with a regulatory framework designed for international financial services, including virtual assets and fiat-referenced tokens, which the Financial Services Act 2025 covers expressly.

Conflict Resolution Mechanisms

The integration of legal elements from different sources, GMC's own Acts, the received common law, the applied statutes, the applied financial services rules, the Schedule C laws and Bhutanese law, creates potential for conflicts and inconsistencies. The Application of Laws Act establishes mechanisms for resolving them:

Hierarchy of Legal Sources

Section 7(3) establishes a clear hierarchy between the Schedule A enactments and the Schedule B financial services laws: where an applied general enactment and an applied financial services law conflict, the applied general enactment prevails, unless the GMC Authority determines otherwise.

This provision creates a rebuttable presumption in favor of the Schedule A enactments, while preserving the Authority's power to determine otherwise in specific cases. This flexibility allows for context-sensitive resolution of conflicts while providing a default rule for legal certainty.

Residual Application of Bhutanese Law

Section 7(2) addresses matters not governed by the applied laws: the laws of the Kingdom of Bhutan continue to apply for all other matters, save that the applied general law has presumptive effect for all civil and commercial matters and persuasive effect in the application of all other laws in the GMC, subject to such modifications as the circumstances require.

This provision creates a sophisticated framework for addressing legal gaps:

Bhutanese law applies as the default for matters not governed by a GMC Act or the applied laws

The parent jurisdiction's law has "presumptive effect" for civil and commercial matters

The parent jurisdiction's law has "persuasive effect" in the application of all other laws

The terms "presumptive effect" and "persuasive effect" set different degrees of deference to the parent jurisdiction's law, stronger deference in civil and commercial contexts and lighter deference in other areas.

GMC Authority Determination Power

Section 7(1) empowers the GMC Authority to "determine the applicable laws" for matters not governed by the applied laws. This determination power provides an important mechanism for addressing legal uncertainties through authoritative rulings.

The Authority's determinations under this power override the default rules in Section 7(2) when specifically exercised.

Guidance Power

Section 8 empowers the GMC Authority to "give Guidance" with respect to:

• "the general principles of interpretation applicable to any provision of this Act or any GMC laws"
  
  
• "the interpretation or resolution of any conflict between the laws applied pursuant to Articles 3, 4, and 5 above"
  
  
• "the specific effect of any provision of this Act or any GMC laws"
  
  
• "giving effect to matters set out in Article 7 above"
  
  
• "any other matter which it appears to the GMC Authority to be desirable to give Guidance"
  
  

This guidance power provides an important tool for clarifying the application of the complex hybrid legal system, particularly in addressing potential conflicts or ambiguities. The non-binding nature of guidance (as opposed to legislative amendments) provides flexibility while enhancing legal certainty.

Modification Power

Section 10 authorises the GMC Authority to "modify or substitute" provisions in applied enactments "where it considers it necessary or expedient for the purpose of removing any difficulty or conflict, whether arising from local conditions or circumstances or otherwise." This modification power provides a direct mechanism for addressing conflicts through targeted interventions in specific provisions.

Together, these mechanisms address the tensions that arise from combining elements of different legal systems. In practice the order of application is: first a GMC Act on point; then a Schedule A statute with its GMC modifications; for financial services, the Financial Services Act 2025 and the GFSO rulebooks with Schedule B underneath; for goods, the Customs Act 2025 and the Schedule C laws; and otherwise the section 3 common law followed by the section 7 residual rules.

Administrative and Judicial Functions

Transitional Governance Model

Section 11 of the Act establishes a transitional governance model: "To avoid doubt, until and unless the GMC Authority establishes appropriate executive and judicial bodies, all executive and judicial functions arising from this Act, shall be carried out by the GMC Authority or such persons or bodies as may be authorised in writing by the GMC Authority."

This provision acknowledges the practical challenge of establishing specialised institutions in a new jurisdiction. By consolidating executive and judicial functions within the Authority at the outset, the Act allowed coordinated implementation while the specialised bodies were built.

The transitional nature of this arrangement is emphasised by repeated references throughout the Act to the establishment of specialised bodies under Article 4(1) of the Royal Charter. Within a year of the Act's commencement the Authority had done so for the functions that matter most to business.

Executive and Regulatory Bodies Now in Place

Sections 4(4)(a) and 5(4)(a) anticipated the establishment of specialised administrative and regulatory bodies to replace the GMC Authority's direct exercise of these functions. The Authority determined the pace and structure of that specialisation through the 2025 Acts.

The bodies and officers now in place are:

• Financial services regulation: the Gelephu Financial Services Office (GFSO), the Regulator under section 1A of the Financial Services Act 2025, with in-principle approval typically issued within two to three months of a complete application
  
  
• Company registration and corporate oversight: the Registrar of Companies within the Gelephu Corporate Registration Office (GCRO), a two-stage process of expression of interest assessed against the eight priority industries, then incorporation through an empanelled corporate service provider, mandatory since 1 November 2025
  
  
• Employment regulation: the Employment Act 2025
  
  
• Immigration and customs: the Controller of Work Passes under the Employment of Foreign Workforce Act 2025 and the Director-General of Customs under the Customs Act 2025
  
  
• Tax administration: the Comptroller of Income Tax under the Income Tax Act 2025
  
  
• Investment facilitation: the Economic Development Group (EDG), the one-stop shop for land leases, incorporation coordination and clearances
  
  

Judicial Development

Sections 4(4)(b) and 5(4)(b) anticipate a separate judiciary replacing the GMC Authority's direct exercise of judicial functions, and Section 5(4)(b) refers to "an independent judiciary." The Charter fixes that architecture at the constitutional level: Article 1 confers independent judicial authority with final adjudication, and the 2025 Acts provide that the courts hearing particular matters are the judicial bodies designated by the Druk Gyalpo.

Regulatory Coordination

The initial consolidation of regulatory functions within the GMC Authority allowed coordinated implementation, and the GCRO, GFSO and EDG now operate as the front doors for registration, licensing and land.

Investment and Business Framework

The legal foundation established by the Application of Laws Act, and the GMC Acts built on it, provide the framework for investment and business activity within the GMC. Every "$" in the GMC Acts means United States dollars, so fees, capital thresholds, penalties and tax bands are all in one currency, and there are no foreign exchange controls except for the Ngultrum.

Corporate Structure and Governance

Company Formation and Governance

The Companies Act 2025, which re-enacted with amendments the Companies Act 1967 formerly applied through Schedule A, gives businesses a familiar and well-tested framework for corporate formation, governance and compliance. The Act offers:

Multiple Corporate Forms: The Act provides for companies limited by shares, limited by guarantee or unlimited (s. 17(2)), private or public. Alongside it, the Limited Liability Partnerships Act 2026, Limited Partnerships Act 2026, Partnership Act 2026 and Business Names Registration Act 2026 complete the range of entities. This diversity allows businesses to select appropriate forms for different activities and risk profiles.

Formation Procedures: Incorporation runs through the GCRO in two stages, an expression of interest assessed against the eight priority industries, then incorporation through an empanelled corporate service provider (mandatory since 1 November 2025). A private company needs one member, at least one director ordinarily resident in GMC (a valid work pass counts), a registered office in GMC and a minimum paid-up capital of US$1; the published fee for a private company limited by shares is US$2,000, with US$2,000 payable annually.

Corporate Governance Framework: The Act provides detailed requirements for corporate governance, including:

• Director duties and responsibilities
  
  
• Shareholder rights and remedies
  
  
• Company meetings and resolutions
  
  
• Corporate disclosure and transparency
  
  
• Related party transactions
  
  
• Minority shareholder protections
  
  

Corporate Finance: The Act regulates key aspects of corporate finance, including:

• Share issuance and capital maintenance
  
  
• Dividend distributions
  
  
• Financial assistance restrictions
  
  
• Debentures and charges
  
  
• Corporate Compliance: The Act establishes ongoing compliance requirements, including:
  
  
• Annual returns and financial statements
  
  
• Audit requirements
  
  
• Company registers and records
  
  
• Disclosure of substantial shareholdings
  
  

This corporate framework provides legal certainty for businesses establishing operations in the GMC. Basnet Law Pte. Ltd. was the first law firm incorporated under it.

Insolvency and Restructuring

The applied Insolvency, Restructuring and Dissolution Act 2018 (Schedule A, item 10) provides a modern framework for addressing business distress and failure. The statute includes:

Corporate Rescue Mechanisms: The Act provides various options for business rehabilitation, including:

• Judicial management (similar to US Chapter 11 administration)
  
  
• Schemes of arrangement
  
  
• Simplified insolvency procedures for small companies
  
  

Liquidation Procedures: The Act establishes orderly procedures for company liquidation, including:

1. Voluntary liquidation by shareholders
   
   
2. Compulsory liquidation by creditors
   
   
3. Appointment and powers of liquidators
   
   
4. Distribution of assets
   
   

Cross-Border Insolvency: The Act incorporates the UNCITRAL Model Law on Cross-Border Insolvency, facilitating coordination of multi-jurisdictional insolvency proceedings.

Director Liability: The Act provides for potential director liability in cases of wrongful or fraudulent trading, creating incentives for responsible corporate governance.

This insolvency framework provides certainty for both businesses and creditors regarding business failure scenarios, encouraging investment while protecting creditor interests.

Commercial Transactions

Contract Law Framework

The received common law provides a sophisticated contract law framework based on English common law principles but adapted to Asian commercial contexts. This framework includes:

• Formation Principles: Clear rules regarding offer, acceptance, consideration, intention to create legal relations, and certainty of terms.
  
  
• Interpretation Approach: Sophisticated principles for contract interpretation, focusing on objective meaning within commercial context.
  
  
• Performance and Breach: Well-developed doctrines regarding performance, breach, repudiation, and remedies.
  
  
• Defenses and Vitiating Factors: Established principles regarding misrepresentation, mistake, duress, undue influence, and illegality.
  
  
• Remedies: A full range of remedial options including damages, specific performance, injunctions, and rescission.
  
  

This common law framework is supplemented by specific statutory provisions, including:

Third Party Rights: The Contracts (Rights of Third Parties) Act 2007 modifies traditional privity of contract principles to allow specified third parties to enforce contractual terms.

Sale of Goods: The Sale of Goods Act 2026, GMC's own Act in operation from 15 June 2026, provides the framework for sales transactions, including:

• Transfer of title and risk
  
  
• Implied terms regarding quality, fitness, and description
  
  
• Delivery and acceptance
  
  

Remedies for breach

• Unfair Terms Control: The Unfair Contract Terms Act 2026, in operation from 15 June 2026, restricts the ability to exclude or limit liability through contract terms, particularly in standard form contracts and consumer contexts.
  
  
• Electronic Transactions: The Electronic Transactions Act 2010 provides legal recognition for:
  
  
• Electronic records and signatures
  
  
• Electronic contracts
  
  
• Automated transactions
  
  
• Electronic government services
  
  

Together, these common law principles and statutory provisions create a legal framework for commercial transactions that balances freedom of contract with appropriate protections against unfair practices.

Employment Framework

The Employment Act 2025 and the Employment of Foreign Workforce Act 2025, GMC's own Acts which re-enacted with amendments the two employment statutes formerly applied through Schedule A, establish the framework for employer-employee relations and the foreign workforce.

Local Employment Regulation

The Employment Act 2025 regulates employment relationships, including:

Employment Terms and Conditions: The Act requires written key employment terms and regulates:

• Working hours and rest days
  
  
• Annual leave, sick leave, and public holidays
  
  
• Salary payment and protection
  
  
• Notice periods and termination procedures
  
  

Employee Protections: The Act provides protections against:

• Unfair dismissal
  
  
• Unauthorized deductions
  
  
• Excessive working hours
  
  
• Discrimination based on protected characteristics
  
  

Special Categories: The Act includes specific provisions for:

• Part-time employees
  
  
• Contract workers
  
  
• Young persons
• 
  
• Older workers
  
  

Dispute Resolution: The Act establishes mechanisms for resolving employment disputes, including mediation, adjudication, and appeals processes.

This framework provides legal certainty for both employers and employees, and because it is now a GMC Act its content is settled by the GMC Authority rather than by the parent jurisdiction's amendment cycle.

Foreign Workforce Management

The Employment of Foreign Workforce Act 2025 provides a structured approach to recruiting and managing foreign workers. Key provisions include:

• Work Pass System: Every foreign employee and self-employed foreigner needs a work pass (ss. 5, 7 and 10); the categories, duration, criteria and conditions are prescribed by regulations under s. 29(2)(c)
  
  
• The Controller of Work Passes receives applications in the form the Controller determines and may issue an in-principle approval subject to conditions (s. 7)
  
  
• A valid work visa or work pass makes the holder "ordinarily resident in GMC" for the purpose of serving as a company's resident director (Companies Act 2025, s. 145(1A))
  
  
• Alongside the work pass regime, a sandbox Digital Nomad Visa programme with Nomad Club runs for 12 months, renewable to 24
  
  

Employer Obligations: The Act imposes obligations on employers of foreign workers, including:

• Responsibility for repatriation
  
  
• Provision of acceptable accommodation
  
  
• Maintenance of medical insurance
  
  
• Payment of required levies
  
  

Compliance and Enforcement: The Act establishes enforcement mechanisms, including:

• Inspections and investigations
  
  
• Administrative penalties
  
  
• Criminal sanctions for serious violations
• 
  

Prohibited Immigrants: The Second Schedule to the Act lists prohibited immigrants who cannot be issued a pass.

This foreign workforce system gives the GMC the tools to attract international talent while maintaining appropriate controls and protections.

Taxation System

The Income Tax Act 2025 (GMC Law No. 6 of 2025), which re-enacted with amendments the Income Tax Act 1947 formerly applied through Schedule A, sets GMC's own rates and exemptions. Several of its provisions commence only on a date appointed by Gazette notification under s. 1(3), so any provision relied on should be checked for commencement.

Income Tax

The Income Tax Act 2025 provides the framework for corporate and personal income taxation, including:

Corporate Taxation: The Act establishes principles for:

• A company rate of 15% on every dollar of chargeable income, with residence turning on whether control and management of the business is exercised in GMC
  
  
• A founders company exemption of up to 15 years for approved companies in a founders industry (s. 13Y), with no new approvals after 31 December 2030
  
  
• A strategic and development company rate of not less than 5% for up to 20 years (s. 43D), with the same cut-off
  
  
• Fund and family office exemptions (ss. 13O, 13OA and 13U, 15 years) and manager rates of 5% or 10% for up to 20 years
  
  
• No capital gains tax and no withholding tax on dividends
  
  

Personal Taxation: The Act provides for:

• A 0% rate for every individual who is not a citizen of the Kingdom of Bhutan, whether resident in GMC or not, on chargeable income derived on or before 31 December 2030 (s. 43(1)(ba))
  
  
• A progressive scale for Bhutanese citizens resident in GMC, topping out at 15%
  
  
• Employment income derived from GMC where the employment is exercised in GMC, whether or not it is received there (s. 12(4))
  
  
• Tax residence determined under s. 2(1)
  
  

Withholding Tax: There is no withholding tax on dividends. Interest paid to non-residents carries 10% withholding, reduced to 0% for approved funds, family offices and managers.

International Provisions: The Act includes provisions for:

• Double taxation arrangements with governments outside GMC, given effect by order of the designated officer (s. 49); the Bhutan-Singapore double taxation agreement signed on 12 May 2026 is in the ratification process
  
  
• Exchange of information under double taxation and exchange-of-information arrangements (Part 20A, ss. 105A to 105H)
  
  
• International tax compliance agreements, including FATCA, automatic exchange of financial account information, country-by-country reporting and the crypto-asset reporting framework (s. 105K)
  
  
• Advance rulings (s. 108)
  
  

Approved founders companies and approved strategic and development companies are granted their concessions by discretionary approval, and both incentives close to new approvals after 31 December 2030.

Sales Tax, Customs and Excise

The Goods and Services Tax Act 1993 was deleted from Schedule A by the 2025 amendment. Section 5A and Schedule C apply the Kingdom of Bhutan's sales tax, customs and excise laws in GMC instead, alongside GMC's own Customs Act 2025:

• Schedule C: applies the Sales Tax, Customs and Excise Act 2000 of the Kingdom of Bhutan, the related rules and tax Acts of 2001, 2011, 2012, 2014, 2017, 2020 and 2023, and the Bhutan Trade Classification and Tariff Schedule (7th edition, 2022).
  
  
• Repeal Protection: a repeal in Bhutan does not automatically take effect in GMC unless the GMCA accepts it, so the version that applies is the one GMC has adopted.
  
  
• Customs Act 2025: creates the GMC customs territory, the Director-General of Customs and the duty structure for goods imported into the customs territory.
  
  
• Two Layers: importers work with the GMC Customs Act and the applied Bhutan sales tax and excise laws.
  
  

Businesses importing goods into GMC should obtain the GMC-adopted versions of the Schedule C laws rather than relying on the current Bhutanese text.

Property and Transaction Taxes

The applied Property Tax Act 1960 and Stamp Duties Act 1929 (Schedule A, items 14 and 17) establish frameworks for taxing real estate and specified instruments. Land in GMC is made available on lease.

• Property Tax: The Act provides for annual taxation of real property based on annual value, with potential differentials between owner-occupied, investment, and commercial properties.
  
  

Stamp Duties: The Act imposes duties on specified instruments, potentially including:

• Property conveyances and leases
  
  
• Share transfers
  
  
• Loan agreements
  
  
• Insurance policies
  
  

These transaction taxes provide additional revenue sources while offering potential policy tools for influencing real estate and capital markets.

Financial Services Regulation

The Financial Services Act 2025, built on the Schedule B rulebooks, establishes the framework for financial activities within the GMC, with GFSO as the single regulator. Carrying on a regulated activity by way of business in GMC requires a licence unless an exclusion or exemption applies. The system covers all major aspects of financial services:

Licensing and Authorization

The Financial Services Act 2025 establishes the framework for licensing financial institutions, including:

Regulated Activities: The Act defines the financial activities requiring a licence, including:

• Banking and deposit-taking
  
  
• Insurance and reinsurance
  
  
• Investment management and advice
  
  
• Dealing in investments
  
  
• Arranging deals in investments
  
  
• Operating exchanges or trading venues, and virtual asset activities including custody and the issue of fiat-referenced tokens, with a bar on regulated activity involving algorithmic stablecoin tokens and privacy tokens
  
  

Payment services

Authorisation Requirements: The Act and the GFSO rulebooks establish criteria for a licence, including:

• Fit and proper assessments for controllers and officers
  
  
• Capital and liquidity requirements
  
  
• Risk management systems
  
  
• Governance arrangements
  
  
• Business plans and feasibility
  
  

Process: GFSO issues in-principle approval, typically within two to three months of a complete application, with a four-week no-objection route for funds and Recognised Foreign Jurisdiction managers and an accelerated pathway for firms already licensed in certain recognised jurisdictions. Matrixport received a financial services licence in September 2025 and BTSE Bhutan received in-principle approval in May 2026. DK Bank is the first GMC-licensed bank, offering corporate accounts in nine currencies and digital asset services.

This licensing framework ensures that only qualified entities engage in financial activities while maintaining proportionality through risk-based requirements.

Conduct Regulation

The Conduct of Business Rulebook establishes standards for business conduct, including:

Client Classification: The rules establish categories of clients (retail, professional, market counterparty) with differential protections.

Disclosure Requirements: The rules mandate transparent disclosure of:

• Product features and risks
  
  
• Fees and charges
  
  
• Conflicts of interest
  
  
• Financial promotions
  
  

Suitability and Appropriateness: The rules require assessment of product suitability for clients based on needs, objectives, and risk tolerance.

Client Asset Protection: The rules establish requirements for segregating and safeguarding client assets.

Record-Keeping: The rules mandate full record-keeping of client interactions and transactions.

These conduct requirements protect clients while establishing clear operational standards for financial institutions.

Prudential Regulation

The Prudential Rulebooks (PRU and PIN) establish requirements for financial institution safety and soundness:

Capital Requirements: The rules establish risk-based capital requirements for:

• Banks and investment firms (PRU)
  
  
• Insurance companies (PIN)
  
  

Liquidity Standards: The rules mandate adequate liquidity buffers for financial institutions.

Risk Management: The rules require systems for managing:

• Credit risk
  
  
• Market risk
  
  
• Operational risk
  
  
• Liquidity risk
  
  
• Insurance underwriting risk
  
  

Governance and Controls: The rules establish standards for:

• Board composition and responsibilities
  
  
• Risk governance
  
  
• Internal controls
  
  
• Compliance functions
  
  
• Internal audit
  
  

These prudential requirements ensure financial institution resilience while maintaining proportionality through risk-based approaches.

Financial Crime Prevention

The AML and Sanctions Rulebook establishes requirements for preventing financial crime:

Customer Due Diligence: The rules mandate identification and verification of customers and beneficial owners.

1. Risk-Based Approach: The rules require risk-based customer and transaction monitoring.
   
   
2. Suspicious Activity Reporting: The rules establish obligations to report suspicious transactions.
   
   
3. Record-Keeping: The rules mandate maintenance of full customer and transaction records.
   
   
4. Sanctions Compliance: The rules require screening against applicable sanctions lists.
   
   

These requirements align with international standards and apply to virtual asset firms in the same way as to traditional financial institutions.

Market Regulation

The Market Infrastructure Rulebook (MIR) and Market Rules (MKT) establish the regulation of capital markets:

Exchange Regulation: The rules establish requirements for:

• Transparent and fair trading
  
  
• Market surveillance
  
  
• Member requirements
  
  
• Trading rules and procedures
  
  

Clearing and Settlement: The rules establish standards for:

• Central counterparty clearing
  
  
• Settlement finality
  
  
• Default management
  
  
• Risk management
  
  

Securities Offerings: The rules establish disclosure requirements for:

• Initial public offerings
  
  
• Secondary offerings
  
  
• Debt securities
  
  
• Investment funds
  
  

Market Abuse: The rules prohibit and establish enforcement mechanisms for:

• Insider dealing
  
  
• Market manipulation
  
  
• Unlawful disclosure of inside information
  
  

These market rules are the base on which GFSO has given in-principle approval for a multilateral trading facility for virtual assets.

Fund Regulation

The Fund Rulebook establishes the framework for investment funds:

Fund Manager Requirements: The rules establish standards for:

• Authorization of fund managers
  
  
• Capital requirements
  
  
• Risk management
  
  
• Governance and control systems
  
  

Fund Categories: The rules establish different fund categories with proportionate requirements, including:

• Retail funds
  
  
• Professional investor funds
  
  
• Specialised funds (for example real estate, private equity and digital assets)
  
  
• Funds of Recognised Foreign Jurisdiction managers, which use the four-week no-objection route
  
  

Operational Requirements: The rules establish standards for:

• Fund valuation
  
  
• Custody of assets
  
  
• Related party transactions
  
  
• Delegation of functions
  
  

Disclosure and Reporting: The rules mandate:

• Prospectus disclosure
  
  
• Periodic reporting to investors
  
  
• Regulatory reporting
  
  

These fund rules, together with the Income Tax Act 2025 fund and family office exemptions (ss. 13O, 13OA and 13U) and the 5% and 10% manager rates, are the framework for a fund management industry within the GMC.

Special Features and Innovations

Mindfulness and Sustainability Integration

While the Application of Laws Act focuses on the legal foundation for the GMC, the city's name signals a distinctive emphasis on mindfulness principles. Though not addressed in the Act itself, this orientation reaches the law in a concrete way: expressions of interest to the GCRO are assessed against the eight priority industries (Spiritual; Health and Wellness; Education and Knowledge; Agri-Tech and Forestry; Green Energy and Technologies; Finance and Digital Assets; Aviation and Logistics; and Tourism), so the industries determine who is admitted.

Areas where mindfulness and sustainability principles can shape the framework further include:

• Corporate Governance: Enhanced requirements for stakeholder consideration, sustainability reporting, and ethical business practices.
  
  
• Financial Regulation: Potential development of sustainable finance frameworks, ESG disclosure requirements, and incentives for mindful investment.
  
  
• Employment Practices: Adaptation of employment laws to support work-life balance, mindful workplace practices, and employee wellbeing.
  
  
• Urban Development: Integration of mindfulness principles into land use regulation, building standards, and public space requirements.
  
  

GMC-specific legislation and guidance in these areas would operationalise mindfulness principles within the legal framework established by the Application of Laws Act.

Guidance Mechanism

Section 8's provision for GMC Authority guidance is a practical mechanism for clarifying and developing the legal framework. This guidance power, which extends beyond statutory interpretation to the resolution of conflicts between legal sources, provides flexibility for addressing complexities in the hybrid system without formal legislative amendment.

Potential applications of this guidance power include:

• Sectoral Guidelines: Detailed guidance for specific industry sectors regarding applicable requirements and compliance approaches.
  
  
• Interpretive Statements: Clarification of how incorporated provisions should be interpreted in the GMC context.
  
  
• Conflict Resolution Frameworks: Structured approaches for resolving tensions between different legal sources.
  
  
• Registry and Regulator Guidance: Published material such as the GCRO FAQ for GMCA Entities and the GFSO rulebooks already perform this role for registration and licensing.
  
  

The effective use of this guidance power supports legal certainty while maintaining flexibility in the evolving legal framework.

Legal Hybridization Approach

The GMC's approach to legal hybridisation, applying entire legal frameworks from different jurisdictions and then re-enacting the important ones as GMC Acts, is a distinctive strategy compared with more common approaches to legal transplantation. Rather than drafting a code from scratch, the Act applied entire bodies of law from an established common law jurisdiction and an established international financial centre, with mechanisms for adaptation, and GMC has used the two years since to localise the parts that matter most.

This approach offers several potential advantages:

• Legal Certainty: Businesses can rely on established jurisprudence and commentary from the source jurisdictions.
  
  
• Implementation Efficiency: The GMC can leverage existing regulatory experience and practices from the source jurisdictions.
  
  
• Dynamic Updating: For the statutes and rules still applied, developments in the source jurisdictions flow through automatically, keeping the GMC framework current.
  
  
• Adaptability: The qualifications and modification powers allow for customization to GMC circumstances while retaining the core frameworks.
  
  

The qualifications and modification powers give the GMC Authority the tools to manage tensions between different legal sources and adapt the applied frameworks to local circumstances while maintaining coherence.

Conclusion: A Bold Legal Design

The Application of Laws Act 2024 establishes a bold legal design, creating a hybrid jurisdiction that draws from diverse legal traditions to create a workable and innovative legal environment. By applying elements from an established common law jurisdiction and an established international financial centre while retaining connections to Bhutanese law, and then enacting its own Acts on that base, the GMC has created a distinct legal identity that positions it as a bridge between different legal and commercial traditions.

The Act's mechanisms for application, adaptation, conflict resolution and institutional development provide the framework for establishing and evolving the GMC's legal system. The selection of an established commercial law framework and a mature financial regulatory system created a solid foundation, and the GCRO, GFSO and EDG now operate on it.

For international businesses and investors engaging with the GMC, this legal framework offers a combination of familiar international standards with local adaptations. The applied frameworks and the GMC Acts provide legal certainty and operational clarity, while the GMC's mindfulness orientation offers scope for sustainable and ethical business development. Basnet Law Pte. Ltd., the first law firm incorporated in GMC, advises on the statute and the registry from Suite 413, Level 4, ChoeGo Building, Phendey Street, Gelephu.

As the GMC's legal system matures through practical application, it is emerging as a distinctive model for combining economic dynamism with mindfulness and sustainability, of interest not only for Bhutan but for the wider exploration of alternative approaches to legal and economic development.

Appendix: Key GMC Laws and Regulations

Schedule A: Applied Enactments (as originally listed, with the 2025 and 2026 deletions marked)

• Companies Act 1967 (deleted 2025; replaced by the Companies Act 2025)
• Contracts (Rights of Third Parties) Act 2007
• Customs Act 1960 (deleted 2025; replaced by the Customs Act 2025)
• Electronic Transactions Act 2010
• Employment Act 1968 (deleted 2025; replaced by the Employment Act 2025)
• Employment of Foreign Manpower Act 1990 (deleted 2025; replaced by the Employment of Foreign Workforce Act 2025)
• Goods and Services Tax Act 1993 (deleted 2025; Bhutan's sales tax laws apply under Schedule C)
• Immigration Act 1959
• Income Tax Act 1947 (deleted 2025; replaced by the Income Tax Act 2025)
• Insolvency, Restructuring and Dissolution Act 2018
• Interpretation Act 1965
• Official Secrets Act 1935
• Personal Data Protection Act 2012
• Property Tax Act 1960
• Sale of Goods Act 1979 (deleted 15 June 2026; replaced by the Sale of Goods Act 2026)
• Spam Control Act 2007
• Stamp Duties Act 1929
• Unfair Contract Terms Act 1977 (deleted 15 June 2026; replaced by the Unfair Contract Terms Act 2026)
  
  

Schedule B: Applied Financial Services Regulations

Financial Services and Markets Regulations 2015 (repealed and re-enacted with amendments by the Financial Services Act 2025), including the following rules:

1. Anti-Money Laundering and Sanctions Rules and Guidance (AML)
2. Captive Insurance Business Rules (CIB)
3. Conduct of Business Rulebook (COBS)
4. Fund Rules (FUNDS)
5. General Rulebook (GEN)
6. Glossary (GLO)
7. Market Infrastructure Rulebook (MIR)
8. Market Rules (MKT)
9. Prudential, Insurance Business (PIN)
10. Prudential, Investment, Insurance Intermediation and Banking Rules (PRU)

Image courtesy: Gelephu Mindfulness City