OAG declines ACC request to invoke law that could imprison hundreds of Bhutanese for up to 15 years for fronting

So far fronting cases have mainly been handled as an administrative issue by the Department of  Trade and regional fronting committees who cancel such licenses, impose a Nu 10,000 fine and ensure that the person does not get any future licenses.

However, the Anti Corruption Commission (ACC) in its widespread investigation into fronting in Phuntsholing has asked the Office of the Attorney General (OAG) to apply a more stringent ACC law that could lead up to a maximum of 15 years of imprisonment for fronting.

The ACC recently sent 29 fronting cases to the OAG all involving Bhutanese individuals who took trade licenses and then gave it to non-national traders for a monthly commission or ‘rent’.

ACC wants to apply section 66 for ‘active commercial bribery’ and section 67 for ‘passive commercial bribery’. Both these sections are value based sentencing going up to a second degree felony that carries a minimum of nine years imprisonment and a maximum of 15 years imprisonment.

This basically means that anyone giving or receiving a fronting commission or rent at or above the three years minimum wage of Nu 125 a day coming to Nu 136,875 will be imprisoned. Under the penal code any sentence at or above three years will lead to imprisonment and so thrimthue cannot be paid for it.

As per the penal code a fourth degree felony carries a minimum of three years imprisonment with a maximum of less than five years.

A third degree felony will have a minimum of five years with a maximum of less than nine years.

So depending on the amount at or above Nu 136,875 a Bhutanese can serve time in prison till a felony of the third degree.

In cases where the commission equals to or exceeds the national minimum wage of 35 years then the second degree felony is applied as per the ACC Act.

Of the 29 cases received the OAG filed 23 cases on Friday. Of the 23 cases if the ACC’s ‘commercial bribery’ clause had been applied  there were 14 Bhutanese individuals who would be up for jail time beyond three years based on the commission amounts including one who would be up for up to 15 years jail time.

The OAG did its own legal due diligence based on the ACC request and it has come up with some legal and past precedent arguments against applying section 66 and 67 of the ACC Act that it put forward in a letter to the ACC sent on Friday.

The OAG based on its legal reasoning has decided not to charge the 23 cases that it filed on Friday with the ‘commercial bribery’ clause. Instead it has filed a civil suit to recover the commission money and interest on the rupee used.

The letter says that after considering the commercial situation in Samdrupjongkhar, Gelephu and Phuentsholing towns, the government determined the need to take appropriate measures to protect Bhutanese traders who were becoming vulnerable due to increasing unfair competition being put up by non-national business personnel who were running various businesses within Bhutan by means of using trade licenses owned by Bhutanese nationals on the payment of commissions.

It goes on to list various Trade rules and regulations that were put in place at various times in 1988, 1995, 1997 and 2005 by the government to deal with fronting. The OAG letter points out that as a result there are already penalties like cancellation of the license along with any other licenses held by the violator, a Nu 10,000 fine and that violators shall not be issued any licenses thereafter.

The OAG says as of July 2015 there were 346 violations detected which was dealt by imposing such administrative penalties.

It says this establishes a clear set of precedence on the application of law and their liability for an act of ‘fronting’ a trade license.

“Hence, ‘fronting’ is determinately an act of abusing administrative privileges granted in the nature of trade license by the state to its citizens and if we are now to prosecute abusers of the same administrative privileges for the offence of “commercial bribery” under Section 66 of the ACC Act (as ACC reports suggested), it would not only undermine the legitimacy of well established precedence set by 346 incidents of fronting cases in the last 27 years of official records but could also tantamount to a state authority stretching the purpose of those Rules and Procedure to a breaking point,” said the letter.

It goes on to say that while eliminating corruption is important, “Yet we equally cannot deny the mandatory requirement of the state to meet out equal treatment of liability for the same offence as such denial corrodes the very substratum of the principle of equal protection of law.”

The letter argues that it is a constitutional right of all persons to be accorded “non-discriminatory, effective and equal protection of the law” under Article 7(15) of the Constitution. Hence, selective prosecution of individuals, especially in the present fronting cases, is in itself aberration from constitutional norms.

It says that there has to be an Act of Parliament to designate fronting as a criminal act which is not there.

The OAG while acknowledging the ‘commercial bribery’ sections in the ACC Act 2011 says that the ACC Act itself does not mention or define fronting which would become a legitimate defense for the defense under section 77(a) of the Penal code.

Section 77 (a) says “A defendants belief that one’s conduct does not legally constitute an offence shall be a defence to the prosecution for that offence based upon the conduct when the law defining the offence is not known to the defendant and has not been published or disseminated or otherwise reasonably made available prior to the conduct alleged.”

The letter further says that the ACC Act of 2011 neither makes reference to “fronting” as constituting a criminal offence nor did it repeal any of the past rules and procedure.

It says that at the same time it is not right for the nation to bear the losses of such acts and so the OAG in addition to other relevant charges will be filing a civil suit to recover the commission amount and also the interest on the rupee used by the non-national traders.

When asked why OAG had taken such a stand on the ACC’s proposed report, the Attorney General Shera Lhundup said, “If proportionality is the sanity of law, then the sense of certainty is undeniably the soul of it.” The commercial bribery section of the ACC Act if applied for fronting has very widespread implications in Bhutan.

There are around 40,000 trade and business licenses in Bhutan of which the vast majority is small and medium enterprises like shops, restaurants, bars, petty contractors etc.

Many small businesses not only in border areas but also in almost all towns across Bhutan from Thimphu to Trashigang exist on the basis of business licenses given for a fee by the original owner.

If the ACC clause had been applied these hundreds if not thousands of small businesses across Bhutan stand to not only have their licenses cancelled but also potentially serve prison time for giving or receiving commissions or ‘rent’ for the license.

Almost all the 346 fronting cases that have been caught till date are small shops. This is when neither the ACC nor any other agency has made any headway in the case of major industrial houses engaging in fronting that really impacts the economy with rupee and third country foreign currency leaving the country.

The Bhutanese despite repeated attempts could not get a statement or response from the ACC.

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