A guarantee for $3 million offered by ex-Premier Sir John Swan in a bid to bring a McDonald's fast food restaurant to Bermuda was conditional on a burger bar opening on the Island, Attorney General Elliott Mottley told a court yesterday.

He was speaking during a court hearing challenging the legality of the Prohibited Restaurants Act, designed to outlaw fast food franchises with a foreign flavour.

Mr. Mottley said: "If you get a McDonald's restaurant, this option becomes an operation.

"If, and only if, there is a McDonald's restaurant in Bermuda could that guarantee became operational.

"Until such time, it doesn't become operational and that condition has nothing at all to do with the Prohibited Restaurants Act.'' The claim came during the third day of legal arguments in a court action brought by Grape Bay Ltd. -- which includes Sir John and UBP backbencher Maxwell Burgess among its directors -- to try and overturn the controversial Act, which was signed into law earlier this year.

Lawyer Mark Diel, appearing for Grape Bay, is arguing that contracts with people in Bermuda and overseas are property under the Constitution -- which protects property rights.

Another plank of the legal argument is whether McDonald's can legally be regarded as a restaurant.

Mr. Diel also claimed that banning McDonald's is not in the public interest and asked Puisne Judge Vincent Meerabux to consider if the Act was in line with the Constitution's guaranteed freedoms.

Mr. Mottley told Supreme Court: "If they operated a McDonald's restaurant and we did something to take away the guarantee, then we would be interfering with their rights.

"But that's not property which will be affected under the terms of the Act.'' Mr. Mottley added that -- in his submission -- there was a difference between prohibition and regulation.

And he insisted: "We have no evidence before us that there was ever any agreement as to the royalties which Grape Bay would pay McDonald's -- that's fundamental to the terms of a contract.'' Mr. Mottley added that leases entered into by Grape Bay Ltd. in expectation of opening a McDonald's at the airport were not in the McDonald's name.

He said: "The lease has nothing whatsover to do with McDonald's. If it was in McDonald's name, that might be different.'' And he pointed out that Grape Bay still had the option "to lease or do whatever they like'' with space earmarked for a Big Mac outlet.

Mr. Mottley told Mr. Meerabux: "If this was taken away, then there would be an argument, my Lord, that they were taking away property.

"But it means they will not be able to run a McDonald's there, but that is an entirely different thing.'' Mr. Mottley also argued: "It is not for this court to substitute its view on what is necessary or socially acceptable for this legislature.'' And he quoted evidence from the Bermuda National Trust and Keep Bermuda Beautiful given to a special Cabinet Committee set up to examine the foreign fast food issue.

Mr. Mottley claimed the two organisations -- and others -- who came out firmly against US fast food chains in Bermuda showed the depth of public feeling opposed to the plans.

He added that McDonald's style restaurants would also hit the business of the "already ailing'' Island restaurant industry.

Mr. Mottley said: "Here we have two arguments -- the economic one and the diluting of the Bermuda image and the North American influence which is already saturating Bermuda.'' The hearing continues.