A new jurisdiction has one structural problem that money cannot solve quickly. It can hire drafters and publish a statute book in eighteen months. It cannot manufacture the decades of judicial reasoning that tell a lender what "reasonable endeavours" means, when a security interest is validly created, how a court will construe an exclusion clause, or what happens to a floating charge in an insolvency. Legal certainty is not a function of how good your legislation is. It is a function of how many times courts have already answered the questions your deal raises. The Gelephu Mindfulness City solved this in its first enacted law, by not trying to write that body of reasoning itself.

In short

• The Application of Laws Act 2024 is GMC's first statute. It applies the common law and equity of established common law jurisdictions, so far as suited to GMC circumstances and subject to GMC enactments.
• It applies a schedule of named statutes drawn from an established common law jurisdiction as amended from time to time, with modifications, and a schedule of financial services rulebooks modelled on those of an established international financial centre, with regulator references reading as GMC's regulator.
• The applied general law is presumptive for civil and commercial matters, and prevails over the applied financial services rules in a conflict unless the GMC Authority decides otherwise.
• GMC is progressively replacing borrowed statutes with its own. Its Companies Act 2025 and Income Tax Act 2025 expressly repeal and re-enact the applied statutes that previously sat in the schedule.
• This is why a lender, an exchange counterparty or a general counsel can price a two-year-old jurisdiction at all.
• The applied case law is persuasive here, not locally tested. There are no reported GMC judgments yet. That is the honest limit of the argument.

The mechanism, in plain terms

The Application of Laws Act 2024 is Law No. 1 of 2024, amended in 2025 and again in 2026. It does four separable things.

It receives a body of common law. The common law and the rules of equity of established common law jurisdictions apply in GMC so far as suited to GMC's circumstances, and subject to GMC's own enactments. That single provision imports the law of contract formation, misrepresentation, mistake, frustration, tort, negligence, trusts, fiduciary duties, tracing, estoppel, specific performance, injunctions and the rest of the general law, along with the reported decisions that give those doctrines content.

It applies a schedule of statutes. Schedule A lists named enactments, drawn from an established common law jurisdiction, that apply in GMC as amended from time to time, with modifications, and the GMC Authority may amend the schedule by order. After deletions made in 2025 and 2026, the schedule currently includes the Contracts (Rights of Third Parties) Act 2007, the Electronic Transactions Act 2010, the Immigration Act 1959, the Insolvency, Restructuring and Dissolution Act 2018, the Interpretation Act 1965, the Official Secrets Act 1935, the Personal Data Protection Act 2012, the Property Tax Act 1960, the Spam Control Act 2007 and the Stamp Duties Act 1929.

It applies a schedule of financial rulebooks. Schedule B applies listed financial services rules, modelled on those of an established international financial centre, with modifications, so that references to that centre's regulator read as the GMC Authority or its regulator, and Islamic finance references are removed. The listed rulebooks cover anti-money laundering, captive insurance, conduct of business, funds, general requirements, the glossary, market infrastructure, market conduct and prudential rules for insurance, banking and investment firms.

It sets the conflict rules. For matters not otherwise covered, the GMC Authority determines the position. Bhutan law applies generally as a default. For civil and commercial matters, the applied general law is presumptive. Where the applied general law and the applied financial services rules conflict, the general law prevails unless the GMC Authority decides otherwise. A separate schedule applies Bhutan's sales tax, customs and excise laws.

There is also a transitional provision that matters more than its length suggests: until separate executive and judicial bodies exist, the GMC Authority administers and enforces.

Why two sources rather than one

The choice looks eclectic until you notice what each source is good at.

The received general law is a mature commercial common law system with a large body of first instance and appellate authority on exactly the questions that dominate cross-border transactions. Its statutes on third party rights, electronic transactions, insolvency and data protection are modern and widely modelled elsewhere.

The applied financial services rulebooks are something different. They are a purpose-built financial services rulebook set for an international financial centre, drafted in the current era, covering conduct, prudential requirements, market infrastructure and funds in the granular, rule-by-rule form that regulators and compliance functions actually work from. No general common law system produces that. A regulator needs a rulebook, not a line of cases.

GMC took the general law from the first and the regulatory machinery from the second, then set a tie-breaker so that a compliance officer and a litigator are never left guessing which one wins.

What it is worth to the people who price risk

A lender. Security, guarantees, subordination, intercreditor arrangements and enforcement all turn on general law doctrines rather than on bespoke local statute. A lender can take a view on a GMC security package by reference to a body of authority it already knows, and can look to an applied modern insolvency, restructuring and dissolution statute for what happens in a default scenario. That is the difference between a legal opinion with a workable set of assumptions and a legal opinion that is mostly qualifications.

An exchange or trading counterparty. Close-out, netting, title transfer, client asset segregation and finality arguments are the ones that decide how bad a counterparty failure gets. A firm assessing GMC is assessing familiar common law doctrines, layered with a modern regulatory rulebook on client assets, conduct and prudential requirements.

A general counsel. The practical question a GC faces is how much of the group's contractual template has to be rewritten. Where GMC law is the received common law, the answer for most commercial terms is: very little. GMC's own Unfair Contract Terms Act 2026 and Sale of Goods Act 2026, both in operation since 15 June 2026, sit in the same tradition, which is why the drafting instincts transfer.

An insurer or a long-horizon investor. The value here is not any single doctrine. It is that the distribution of outcomes is narrower. Most of the questions have already been answered somewhere, by a court, in a reported decision that can be read.

The replacement programme

The borrowing was never meant to be permanent, and GMC has been visibly substituting its own law for the applied statutes. Items were deleted from Schedule A in 2025 and again in 2026, in each case because GMC enacted its own Act on the subject. The Companies Act 2025 repeals and re-enacts, with amendments, the Companies Act 1967 that had been item 1 of the schedule. The Income Tax Act 2025 repeals and re-enacts, with amendments, the Income Tax Act 1947 that had been item 9.

The same pattern is running through financial services. The Gelephu Corporate Registration Office's own published guidance records that GMC initially adopted an established international financial centre's regulatory framework and is progressively adapting and formally enacting those laws as GMC laws, and that the primary financial services law has already been enacted as the Financial Services Act 2025. The General Rulebook, issued in 2026, is now a GMC rulebook.

For an investor the reading is straightforward. GMC borrowed to get to a working legal system quickly, and is converting the borrowings into owned law as capacity allows. Each conversion is drafted deliberately as a repeal and re-enactment with amendments, which preserves continuity of concepts while allowing local adjustment. That is a more careful approach than a clean-sheet rewrite, and it protects the very certainty the borrowing was meant to deliver.

The limit of the argument

Applied case law is persuasive authority. It is not local authority.

When a GMC court eventually decides a contract case, it will be applying the received common law so far as suited to GMC's circumstances and subject to GMC enactments. Three qualifications live in that sentence. Suitability to local circumstances is a judgement that only a GMC court can make, and until it does, nobody knows where it will draw the line. GMC enactments override, and GMC now has a growing statute book of its own. And the applied statutes apply with modifications, which means the text a practitioner reads is not always the text as enacted in the parent jurisdiction.

A lender who understands this will not be deterred by it. It will simply price it, and will draft around it where the sums justify: an arbitration clause with a seat outside GMC, a parent guarantee from an entity in a tested jurisdiction, or a governing law choice for the finance documents that differs from the place of incorporation. These are ordinary techniques and they work here.

What this does not solve yet

There are no reported GMC judgments. Every proposition about how GMC law will be applied in a GMC court is, at this stage, an inference from text.

The judiciary contemplated by the Royal Charter, with independent judicial authority including final adjudication, is being established. Until separate executive and judicial bodies exist, the Application of Laws Act provides that the GMC Authority administers and enforces. Parties with significant exposure should address dispute resolution expressly rather than defaulting.

Schedule A is amendable by order of the GMC Authority, and the applied enactments apply as amended from time to time. That means the content of GMC law can change without a GMC statute, either because the parent jurisdiction amends a listed Act or because the schedule is varied. It is a source of flexibility and a source of monitoring obligation.

The suitability qualification is untested. So is the tie-breaker between the applied general law and the applied financial services rules. Both will get their first real workout in a contested matter that has not happened yet.

And enforcement of a GMC judgment abroad, or a foreign judgment in GMC, is not addressed by a published treaty list. Where cross-border enforcement is central to the credit, arbitration remains the more predictable route.

Frequently asked questions

What law governs a contract between two GMC companies?

Subject to what the parties choose, GMC law, which for most commercial matters means the received common law and equity as applied by the Application of Laws Act, overlaid by GMC's own statutes such as the Sale of Goods Act 2026 and the Unfair Contract Terms Act 2026.

Are English cases relevant in GMC?

Indirectly and substantially. The Act applies the common law and the rules of equity of established common law jurisdictions, and English authority is part of that inheritance. English authority therefore carries the weight it carries in the parent jurisdiction, filtered through that jurisdiction's own development of the law.

Which applied statutes are in force in GMC?

Those listed in Schedule A to the Application of Laws Act, as amended from time to time and with modifications. The list has shrunk as GMC has enacted its own Companies Act and Income Tax Act. It should be checked against the current schedule rather than assumed.

What happens if the applied general law and the applied financial services rulebook position conflict?

The applied general law prevails, unless the GMC Authority decides otherwise. That rule is in the Application of Laws Act itself.

Does this mean GMC is just a copy of another jurisdiction with better tax?

No. GMC has its own primary legislation on companies, tax, financial services, employment, customs, partnerships and sale of goods, its own registrar and regulator, and a statute book denominated in United States dollars. The borrowed law fills the gaps and supplies the general law. The gaps are getting smaller each year.

The bottom line

The most valuable thing GMC did was to resist writing its own contract law. By receiving the common law and equity of established common law jurisdictions, applying a schedule of modern statutes from the parent jurisdiction and a set of purpose-built financial rulebooks, and then progressively enacting its own versions, it gave counterparties something no new jurisdiction can otherwise offer: a body of answers that already exists. That is why a lender can produce a usable opinion on a GMC borrower, and why a GC does not have to rewrite the group's contract templates from first principles. What GMC cannot yet offer is a local court record. Until that exists, the certainty is borrowed rather than owned, and deals should be documented in the knowledge that the first GMC judgment on any of this is still ahead of us.

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.

Sources

• Application of Laws Act 2024 (Law No. 1 of 2024), as amended by the Application of Laws (Amendment) Act 2025 (Law No. 7 of 2025) and the Application of Laws (Amendment) Act 2026 (Law No. 7 of 2026): s. 3 (received common law and equity); s. 4 and Schedule A (applied enactments); s. 5 and Schedule B (applied financial services rules); s. 5A and Schedule C (Bhutan sales tax, customs and excise laws); s. 6 (power to enact laws); s. 7 (matters not covered; presumptive applied general law; conflict rule); s. 8 (guidance); s. 10 (removal of difficulties); s. 11 (administration and enforcement by the GMC Authority pending separate bodies).
• Royal Charter No. 1 of 2024, Articles 1 and 4.
• Companies Act 2025 (Law No. 1 of 2025) (repeal and re-enactment of item 1 of Schedule A).
• Income Tax Act 2025 (Law No. 6 of 2025) (repeal and re-enactment of item 9 of Schedule A).
• Financial Services Act 2025 (Law No. 5 of 2025); GEN Rulebook 2026, Version 1.0.
• Sale of Goods Act 2026 (Law No. 5 of 2026), s. 63; Unfair Contract Terms Act 2026 (Law No. 6 of 2026), s. 30.