National Council’s (NC) Legislative Committee proposed two new clauses on fronting under section 284 while deliberating Penal Code Amendment Bill 2019 yesterday.
Rule 3 of the Rules and Regulations for Establishment and Operation of Industrial and Commercial Ventures in Bhutan 1995 defines fronting as “leasing of the licence to another party to run the business”.
The new clause, section 284 (g), states: “A defendant shall be guilty of an offence of fronting, if the defendant leases or subleases, hires or otherwise permits another person to use or operate one’s licence unless otherwise permitted by laws or polices.”
Licence includes any clearance, approval, consent, no objection, registration, concession and the likes issued by a competent authority.
The second clause, section 284 (h), grades the offence of fronting a maximum of misdemeanor, if the defendant are Bhutanese nationals and a felony of the fourth degree, or a value based sentencing, whichever is higher, if one of the defendants is a person other than a Bhutanese national.
However, the majority of members in the House objected to the phrase: “offence of fronting shall be a maximum of misdemeanor, if the defendants are Bhutanese nationals.”
If an offence is a misdemeanor, a defaulter is sentenced to 1-3 years imprisonment.
Chukha MP Sangay Dorji said that there would be problems if foreigner used licence of a Bhutanese and operated businesses illegally, but if fronting was among Bhutanese it should be graded as a violation so that people are not discouraged from initiating economic activities. “If the defaulters are Bhutanese and a foreigner, rich foreigners would grab major chunk of economic opportunities, depriving Bhutanese of the benefits.”
He further argued that if a daughter wanted to operate a business on her father’s licence, it should be acceptable because it does not affect country’s independence and security.
Gasa MP Dorji Khandu said the laws on fronting should be clear because most of the shops in Phuentsholing were currently being operated on Bhutanese licence by people from across the border. “Such illegal operations deviate income and employment opportunities to foreigners.”
Ministry of Economic Affairs reported that there were 205 fronting cases until April last year in four major towns of Phuentsholing, Gelephu, Samdrupjongkhar, and Mongar. Phuentsholing alone had 161.
Fronting is rampant in businesses such as grocery stores, hotels, telephone booths, garment stores, pastry shops, electronic and hardware shops, scrap dealers and micro businesses. It was found to be prevalent even in large industries and construction sector, according to reports.
Eminent member and a member of the Economic Affairs Committee, Tashi Wangyel, said that fronting had negative impact on economic security of the country and that there would be consequences if Bhutanese offenders were not penalised.
He said that if a contractor breached the contract and was involved in corrupt practices, the government could first revoke his or her licence but if there were no laws on defaulters, that could encourage illegal practices.
Dagana MP Surja Man Thapa argued that there ought not to be fronting cases among Bhutanese. “Why would a Bhutanese want to operate on another person’s licence? Is it because the procedure to obtain the licence is tedious?”
Public awareness could go a long way in educating the people, he suggested.
Some of the members called for stringent implementation of measures by the authorities concerned so that fronting or illegal collaborations between Bhutanese and foreigners could be reduced.
Eminent member Karma Tshering said that the offence was graded ‘maximum of misdemeanor’, which meant that the defaulters would be charged according to level of offence.
Under section 284, the committee also proposed new clauses —market abuse, serious organised crime and clandestine foreign investment, among others.