Summary
- The Application of Laws Act 2024 (Law No. 1 of 2024) is GMC's first statute and the one that decides which body of law governs any question not answered by a GMC Act.
- Section 3 applies the common law of an established common law jurisdiction, including English common law and equity as received there, so far as suited to GMC's circumstances and subject to GMC enactments.
- Section 4 and Schedule A apply ten statutes drawn from an established common law jurisdiction (after the 2025 and 2026 deletions), as amended from time to time and with modifications. Section 5 and Schedule B apply ten financial services rulebooks. Section 5A and Schedule C apply the Kingdom of Bhutan's sales tax, customs and excise laws.
- The Application of Laws (Amendment) Act 2025 (Law No. 7 of 2025) commenced 26 December 2024; it deleted Schedule A items 1, 3, 5, 6, 7 and 9 and inserted s. 5A and Schedule C.
- The Application of Laws (Amendment) Act 2026 (Law No. 7 of 2026) became operative on 15 June 2026 and deleted Schedule A items 15 and 18.
- Section 7 sets the residual order: the GMCA determines uncovered matters, Bhutan law applies generally by default, the applied general law is presumptive for civil and commercial matters, and the applied general law prevails over the Schedule B rules in a conflict.
What the Act is and why it matters
Royal Charter No. 1 of 2024 gives the GMC Authority (GMCA) the power to establish "a legal system based on common law principles" (Article 4). A legal system needs a body of law from the start. GMC did not have time to write a complete code before the first company was formed, so it borrowed one.
The Application of Laws Act 2024 is the borrowing instrument. The Act does three jobs. It imports a general body of common law. It imports specific statutes and rulebooks, with modifications. And it sets the order of priority when two sources say different things.
Every later GMC Act is written against this background. The Companies Act 2025, for example, describes itself on its face as an Act "to repeal and re-enact with amendments the Companies Act 1967 specified in item 1 of Schedule A to the Application of Laws Act 2024" (see our guide to where GMC law comes from). If you do not understand the Application of Laws Act, you cannot read the rest of the statute book properly.
The Act has been amended twice: by Law No. 7 of 2025, which commenced 26 December 2024, and by Law No. 7 of 2026, operative from 15 June 2026. Both amendments removed items from Schedule A as GMC replaced borrowed statutes with its own.
Section 3: the common law and equity
Section 3 applies the common law of an established common law jurisdiction in GMC. That includes English common law and the rules of equity as received in that jurisdiction. Two qualifications are built in:
- The received law applies "so far as suited to GMC circumstances". This is a familiar reception formula. It lets a GMC court decline to apply a rule that only makes sense in its home context.
- It applies "subject to GMC enactments". Any GMC Act displaces the common law to the extent of inconsistency.
The practical effect is that the ordinary law of contract, tort, trusts, agency and restitution exists in GMC without a statute for each, and equitable remedies such as injunctions and specific performance are available in principle. In this article, "received law" means law that applies in GMC because s. 3, 4, 5 or 5A says so, rather than because the GMCA enacted it.
Section 4 and Schedule A: the applied enactments
Section 4 provides that the enactments listed in Schedule A apply in GMC as amended from time to time, with the modifications set out. The GMCA may amend Schedule A by order.
Two features of s. 4 deserve attention. "As amended from time to time" means a change to a listed statute in its home jurisdiction flows through to GMC automatically, unless GMC has modified or replaced it. And the modifications are part of the received law: a Schedule A statute is read with GMC names substituted.
Schedule A as it stands today
After the 2025 and 2026 deletions, Schedule A contains ten items. The item numbers are the original ones; the gaps are the deleted items.
| Item | Enactment | Practical area |
|---|---|---|
| 2 | Contracts (Rights of Third Parties) Act 2007 | Third-party enforcement of contract terms |
| 4 | Electronic Transactions Act 2010 | Electronic signatures and records |
| 8 | Immigration Act 1959 | Entry and stay; sits alongside the Employment of Foreign Workforce Act 2025 |
| 10 | Insolvency, Restructuring and Dissolution Act 2018 | Corporate and personal insolvency, restructuring, winding up |
| 11 | Interpretation Act 1965 | How every statute is read |
| 12 | Official Secrets Act 1935 | Protection of official information |
| 13 | Personal Data Protection Act 2012 | Data protection |
| 14 | Property Tax Act 1960 | Property tax |
| 16 | Spam Control Act 2007 | Unsolicited electronic messages |
| 17 | Stamp Duties Act 1929 | Stamp duty on instruments |
What was deleted, and what replaced it
The Application of Laws (Amendment) Act 2025 deleted items 1, 3, 5, 6, 7 and 9. The GMC Acts say on their face which items they replaced:
- Item 1, the Companies Act 1967, was repealed and re-enacted with amendments by the Companies Act 2025 (s. 1(2)).
- Item 5, the Employment Act 1968, was repealed and re-enacted with amendments by the Employment Act 2025 (s. 1(2)).
- Item 6, the Employment of Foreign Manpower Act 1990, was repealed and re-enacted with amendments by the Employment of Foreign Workforce Act 2025 (s. 1(2)).
- Item 9, the Income Tax Act 1947, was repealed and re-enacted with amendments by the Income Tax Act 2025 (s. 1(2)).
- The Customs Act 2025 repealed the Customs Act 1960, formerly a Schedule A item.
The Application of Laws (Amendment) Act 2026 deleted items 15 and 18 with effect from 15 June 2026, the same day GMC's own Sale of Goods Act 2026 and Unfair Contract Terms Act 2026 came into operation.
The pattern is deliberate and follows the design of other common law financial centres. GMC starts with a borrowed statute, then replaces it with a GMC Act that keeps the structure but localises the content. The most visible localisation is currency: each replacement Act carries a clause reading every "$" as United States dollars (see our guide to the dollar jurisdiction).
Section 5 and Schedule B: the financial services rulebooks
Section 5 applies the rulebooks listed in Schedule B, with modifications. The listed rulebooks were made under the Financial Services and Markets Regulations 2015 of an established international financial centre. Schedule B lists: the AML Rules; the Captive Insurance Business Rules (CIB); the Conduct of Business Rulebook (COBS); the Fund Rules (FUNDS); the General Rulebook (GEN); the Glossary (GLO); the Market Infrastructure Rules (MIR); the Market Rules (MKT); the Prudential, Insurance Business Rules (PIN); and the Prudential, Investment, Insurance Intermediation and Banking Rules (PRU).
The modifications are structural rather than cosmetic. References to the home regulator are read as references to the GMC Authority or its regulator, and references to Islamic finance are removed.
In practice the design is simple: a received common law system governs business regulation, an established international financial centre's rulebooks govern financial services, and those applied rules are being progressively adapted and enacted as GMC laws, the Financial Services Act 2025 being the first.
Two developments sit on top of s. 5. The Financial Services Act 2025 describes itself as an Act to "repeal and re-enact with amendments the Financial Services and Markets Regulations 2015 specified in Schedule B" (preamble and s. 1(2)), so the primary regulatory statute is now a GMC Act. And the Gelephu Financial Services Office (GFSO) has begun issuing GMC rulebooks of its own, starting with the GEN Rulebook 2026 (Version 1.0, dated 7 May 2026). The GFSO page lists the rulebooks now in use: AML and Sanctions; Conduct of Business; Fund; General; Market Infrastructure; and Prudential.
Section 5A and Schedule C: Bhutan's sales tax, customs and excise laws
Section 5A was inserted by the 2025 amendment. It applies the Kingdom of Bhutan's sales tax, customs and excise laws in GMC. Schedule C lists 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).
There is a built-in protection against silent change: a repeal in Bhutan does not automatically take effect in GMC unless the GMCA accepts it. So the version of a Schedule C law that applies in GMC is the one GMC has adopted, not necessarily the latest Bhutanese one.
Schedule C operates alongside GMC's own Customs Act 2025, which creates the GMC customs territory, the Director-General of Customs and the duty structure for goods imported into the customs territory. Businesses importing into GMC therefore work with two layers: the GMC Customs Act and the applied Bhutan sales tax and excise laws.
Sections 6 to 11: powers, residual rules and transition
Section 6 confirms the GMCA's power to enact its own laws. This is the provision under which the whole of the 2025 and 2026 statute book was passed.
Section 7 is the residual rule, and the one most often needed in practice. For matters not covered by a GMC enactment or a received instrument:
- the GMCA determines the applicable law;
- Bhutan law applies generally as the default;
- the applied general law is presumptive for civil and commercial matters; and
- where the applied general law and the Schedule B rules conflict, the applied general law prevails unless the GMCA decides otherwise.
The third rule is the one commercial lawyers will use most. If a question of contract, company, agency or commercial practice is not answered by a GMC Act, the presumption is that the applied general law supplies the answer.
Section 8 provides for Guidance. Section 10 gives a power to remove difficulties, which is a standard tool for a new system to fix transitional gaps by order rather than by amending Act. Section 11 provides that, until separate executive and judicial bodies exist, the GMCA administers and enforces the law.
How to work out the governing rule
Applying the Act to a real question, the order is: first, a GMC Act on point (checking its commencement provision, since several Income Tax Act 2025 provisions are enacted but commence only on a date to be appointed by Gazette notification under s. 1(3)); second, a Schedule A statute, as amended from time to time and with the GMC modifications; third, for financial services, the Financial Services Act 2025 and the GFSO rulebooks, with Schedule B underneath; fourth, for goods, the Customs Act 2025 and the Schedule C laws; and otherwise the s. 3 common law followed by the s. 7 residual rules.
Pitfalls we see
- Reading a Schedule A statute without its modifications. Regulator names, currency, geography and cross-references are all adjusted.
- Assuming a deleted item is still in force. Items 1, 3, 5, 6, 7, 9, 15 and 18 are gone. The GMC replacement Act governs, and it is not identical to the original.
- Assuming a listed statute is frozen. A home-jurisdiction amendment can change GMC law without any GMC action.
- Forgetting Schedule C. Sales tax and excise are Bhutanese law applied in GMC, subject to the GMCA's acceptance of repeals.
Practical checklist / Next steps
- Map your business to the order above and record, for each significant legal question, which source governs.
- Keep a copy of Schedule A with the deletions marked, and diarise the home-jurisdiction amendment cycle for the statutes that matter to you.
- For financial services, work from the Financial Services Act 2025 and the GFSO rulebooks first, and confirm with GFSO which Schedule B rulebooks remain in use for your activity.
- For goods, obtain the GMC-adopted versions of the Schedule C laws rather than relying on the current Bhutanese text.
- For any Income Tax Act provision you intend to rely on, check s. 1(3) to confirm it has commenced.
- Include an express GMC governing-law clause in contracts.
Frequently asked questions
Does English law apply in GMC?
The answer is that it applies indirectly. Section 3 applies the common law of an established common law jurisdiction, which includes English common law and equity as received there. English law therefore reaches GMC through that jurisdiction's reception of it, so far as suited to GMC circumstances and subject to GMC enactments.
Which Schedule A statutes apply in GMC?
Ten remain in Schedule A: the Contracts (Rights of Third Parties) Act 2007; Electronic Transactions Act 2010; Immigration Act 1959; Insolvency, Restructuring and Dissolution Act 2018; Interpretation Act 1965; Official Secrets Act 1935; Personal Data Protection Act 2012; Property Tax Act 1960; Spam Control Act 2007; and Stamp Duties Act 1929. They apply as amended from time to time and with modifications.
Does Bhutanese law apply in GMC at all?
Yes, in two ways. The Kingdom's sales tax, customs and excise laws apply directly under s. 5A and Schedule C. And under s. 7, Bhutan law applies generally as the default for matters no other source covers, with the applied general law presumptive for civil and commercial matters.
What did the 2026 amendment change?
The Application of Laws (Amendment) Act 2026 (Law No. 7 of 2026), operative 15 June 2026, deleted items 15 and 18 from Schedule A. On the same date GMC's own Sale of Goods Act 2026 and Unfair Contract Terms Act 2026 came into operation.
Can the GMCA change Schedule A without a new Act?
Yes. Section 4 gives the GMCA power to amend Schedule A by order. In practice the two changes so far were made by amendment Acts.
Key takeaways
- The Application of Laws Act 2024 is the key to the whole GMC statute book: GMC Acts first, then received statutes and rulebooks, then the received common law, then the s. 7 residual rules.
- Schedule A now holds ten applied statutes; eight items have been deleted and replaced by GMC Acts.
- Financial services law is now anchored in the Financial Services Act 2025 and GFSO's own rulebooks, with Schedule B as the underlying base.
- Sales tax, customs and excise follow Bhutanese law under Schedule C, subject to GMCA acceptance of repeals.
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 (GMC), Art. 4
- Application of Laws Act 2024 (Law No. 1 of 2024), ss. 3, 4, 5, 5A, 6, 7, 8, 10, 11; Schedules A, B, C
- Application of Laws (Amendment) Act 2025 (Law No. 7 of 2025)
- Application of Laws (Amendment) Act 2026 (Law No. 7 of 2026)
- Companies Act 2025, s. 1
- Employment Act 2025, s. 1
- Employment of Foreign Workforce Act 2025, s. 1
- Income Tax Act 2025, s. 1
- Financial Services Act 2025, s. 1
- Customs Act 2025
- Sale of Goods Act 2026, s. 63; Unfair Contract Terms Act 2026, s. 30
- GEN Rulebook 2026 (Version 1.0)
- GCRO FAQ for GMCA Entities (3 June 2026, v0.2), Gelephu Corporate Registration Office
