WASHINGTON - A new chapter in Bermuda's history opened yesterday when the United States formally returned one seventh of the Island's land mass and renounced the right to re-occupy its former military bases.

At a ceremony in Washington, the US and Britain annulled the 1941 Leased Bases Agreement, giving the land back to Bermuda, 38 years ahead of schedule.

The British Ambassador to Washington, Sir Christopher Meyer, and Lincoln Bloomfield, the Assistant Secretary of State for Political and Military Affairs at the State Department, who both signed the Exchange of Notes, described yesterday's deal as "historic".

It brought to an end close cooperation between the US and Bermuda, which began at the signing of the 99 year deal on March 27, 1941 at the height of the Second World War, and carried on through the Cold War.

Bermuda played a crucial role in the effort to defeat the Nazis and in the collapse of Communist totalitarianism, said Mr. Bloomfield.

Although US forces left the Island in 1995, a new era of friendship would continue between Bermuda and the Washington, he said.

At the signing in the Treaty Room of the State Department, Mr. Bloomfield said: "As we exchange these diplomatic notes regarding the termination of the Leased Bases Agreement, I offer to you, the British and Bermudians, our deepest appreciation and thanks for these years of fruitful security partnership.

"In many ways, we are in a situation not unlike that of early 1941. For today, we are also at the front end of a profound challenge to world peace, and are mobilised to fight the global war on terrorism.

"And so I urge our colleagues in Great Britain and Bermuda to look upon this termination of agreement not as an endpoint, but as the close of one chapter in a rich history of collaboration, partnership, and political solidarity on behalf of freedom and universal principles.

"Even as we bring to a close a formal relationship this morning, the US is pleased to be continuing our dialogue on matters of mutual interest.

"I want to assure you that we fully intend to be a good friend to Bermuda, one who will look for ways to be helpful, when asked, consistent with our own laws and constraints.

"We look forward to maintaining the special links that we forged in the last century well into the next with both the UK and Bermuda, and I assure you, you can count on America's friendship every step of the way."

Although the US has refused to pay for the clean-up of oil pollution at the former Naval Base at Morgan's Point, and the asbestos at the Naval Air base at St. David's, it will give Bermuda $11 million for Longbird Bridge, and may provide the Island with a Coast Guard vessel.

The Bermuda Regiment may be allowed to use training facilities in the US, and new provisions are made to allow North Atlantic Treaty Organisation (NATO) troops to use Bermuda in the future.

Sir Christopher said: "The 1941 agreement was a milestone in the creation of the military alliance between the United Kingdom and the United States - an alliance that helped defeat Nazism and face down Soviet Communism.

"Bermuda has made a singular contribution to those efforts, sacrificing a seventh of its land mass for the use by the US Navy and Air Force for over 60 years.

"In terminating the Leased Bases Agreement today, we give that territory back to Bermuda. But we leave in place the unique relationship enjoyed by the UK and Bermuda with the United States, as friends and allies.

"Those relationships are no less important today - and Bermuda's potential contribution no less significant - as, together, we confront new challenges to our security.

"I therefore welcome the readiness expressed by the United States to remain engaged in and, where necessary, to assist Bermuda's security efforts."

Premier Jennifer Smith, Governor Sir John Vereker, US Consul General Dennis Coleman, Cabinet Secretary John Drinkwater, and the Premier's Chief of Staff Sen. David Burch, attended the ceremony on the seventh floor of the State Department building.

Sir Christopher revealed later that the US offer to the British Embassy in Washington was made in early 2001, before the Bush administration came to power, but negotiations had dragged on because of the change in the White House and the time it took to appoint new staff.

After the ceremony, the Premier described the deal as the best on offer, and said it could push forward the development of Morgan's Point.

A number of companies have expressed an interest in transforming the site in Southampton into a housing, golfing and marina complex, but the plans have been on hold since 1999.

Ms Smith said: "It was a historic moment. I have to say that I am extremely pleased by the words from Mr. Bloomfield, particularly when he referred to Bermuda and the US's relationship, and their willingness to continue this together as neighbours and friends to Bermuda.

"That was a very important aspect of our future relationship. It's the end of one chapter and the beginning of another.

"Today signifies the beginning of a new relationship between the US and Bermuda. Over the years, Bermuda has benefited tremendously from the US presence.

"We value the links we have been able to build and anticipate a further strengthening in our future relations. It has been a very long, difficult and complex process."

Referring to Morgan's Point, she said: "I don't know how we would have phased in a deal in an area we didn't have title to. We now have that land reverted back to Bermuda, so that's step one."

Sir John said after the ceremony: "Today's signing of the Exchange of Notes is an historic occasion and marks the beginning of a new era for Bermuda.

"As a result of this, the former US baselands have returned to Bermuda 37 years before the original lease would have expired.

"This is an example of the diligent negotiation and consultative approach taken by all parties." Sir Christopher explained why it had taken from early 2001 to yesterday to conclude the deal.

Although the United Bermuda Party has criticised the deal, saying the UK should have pushed harder for a clean-up, Sir Christopher asserted this was the best offer Bermuda could get.

"Yes, it is the best deal we could have got. It took a lot of hard work by a lot of people in Bermuda and here in the US Embassy in Washington and at the end of the process, we had to make a judgement.

"Was this the best deal we could get or could we do better? After very careful consideration of the way in which the negotiations had progressed, I was in no doubt that this was the best deal on offer, and one we could recommend to the respective governments.

"I think we were clear by then that this was the best offer, but it takes a while to go through the system, particularly when there is a new administration in place."