For they upheld an appeal, reversing an earlier Supreme Court decision to allow Grape Bay Ltd to operate a McDonald's hamburger franchise on the Island.

And yesterday Grape Bay Ltd was ordered to pay the Attorney General's costs for the hearing -- costs expected to run into tens of thousands of dollars.

Lawyers for Grape Bay -- controlled by ex-Premier Sir John Swan and which has Home Affairs and Public Safety Minister Max Burgess among its principals -- were last night poring over the 19-page judgement and considering an appeal to Bermuda's court of last resort -- the Privy Council in London.

"I feel tremendous disappointment,'' Grape Bay lawyer Mark Diel said minutes after the judgement blocking McDonald's was announced.

"We have worked very hard on the case -- we thought, continue to think -- we were correct on the law.

"We will now look carefully at the judgement then consider what our next step is and take instructions from our clients.'' The Privy Council is obliged to hear an appeal based on a Constitutional matter.

Mr. Diel said: "I have read the judgement and formed my own opinion. I have communicated that opinion to my clients and they are considering it.

But he added: "I have had no instructions from my clients at this stage.'' But Solicitor General William Pearce QC, who appeared in the Court of Appeal hearing in March with Caribbean constitutional lawyer Dr. Lloyd Barnett, said: "The decision is the correct one.

"And it's a good one for Bermuda in terms of the precedent it's set in terms of the meaning of Section 1 of the Constitution.'' The Grape Bay team, up against Attorney General Elliott Mottley, successfully overturned the Prohibited Restaurants Act in Supreme Court after Governor Thorold Masefield signed it into law in August last year.

Supreme Court judge Vincent Meerabux ruled the law should be axed because contracts held between Grape Bay and McDonald's and others were property -- and protected under the Constitution.

But Solicitor Mr. Pearce and Dr. Barnett took the case to a four day March hearing in the higher court -- which reserved judgement until yesterday.

And the judgement of the Court of Appeal -- under President Sir James Astwood -- shot down several key claims by Mr. Diel's legal team at the original hearing.

Lawyers ponder Grape Bay's next move The Appeal Court admitted that "letters of intent'' signed between Grape Bay and others were property -- and that the firm had been deprived of their property by the Act.

But the unanimous decision ruled it had not been proved that Grape Bay had been deprived of property without compensation under the Constitution.

The judgement said: "The Prohibited Restaurants Act (1997) does not violate the right of Grape Bay not to be deprived of property without compensation.. .

And the judges steered clear of ruling whether it was in the public interest to block McDonald's.

"I would only say that the legislature, rather than the courts, is in the best position to assess the requirements of the public interest and should be allowed a wide margin of appreciation,'' they wrote.

The judgement -- penned by Appeal Court judge Michael Kempster, who died recently, and co-signed by the others -- also knocked back Grape Bay's claims that McDonald's fell outside the legal definition of a restaurant under the controversial anti-fast food Act.

It said: "In my opinion, the definition of `restaurant' allows of no ambiguity and would render any McDonald's outlet a `prohibited restaurant'.'' The Prohibited Restaurants Act was pushed through Parliament by rebel Government MPs with support from the Opposition in 1996 -- but Senate used its powers to vote it down for a year.

But the `Rebel Five', led by United Bermuda Party backbencher Ann Cartwright DeCouto, brought the bill back to the House of Assembly and won another vote.

Mrs. Cartwright DeCouto, a barrister, was yesterday off the Island and could not comment.

But MP Trevor Moniz, one of the Government rebels -- which also included C.V.

(Jim) Woolridge, now sitting at the Cabinet table with recently-appointed Mr.

Burgess -- as well as Dr. David Dyer and Dr. Clarence Terceira, both now retired from Parliament, welcomed the decision.

Mr. Moniz, also a lawyer, said: "I feel relief after a long, hard slog. There are a number of different issues and I'm happy to see the decision on the Constitutional question -- I think the conclusion is correct.

"The Court of Appeal talk about public interest -- I think that's right. It's a matter for the legislature to assess that, not the courts.'' And he said: "When Ann Cartwright DeCouto and I, with others, sat down to put this Act together, we did it in a very careful fashion. I feel vindicated.'' And Mr. Moniz predicted an appeal by Grape Bay Ltd to the Privy Council would be doomed to failure.

What's Sir John's next step