to begin by stepping down from the arbitration panel.

On Friday, Chief Justice the Hon. Sir James Astwood flatly rejected hoteliers' assertion that Mr. Mello should be removed from the panel because of "suspicion of likelihood of bias''.

But an appeal by the Hotel Employers of Bermuda threatened to delay for months any resolution of the long-standing dispute over a new hotel workers' collective agreement.

"I am sure you will agree that at the present time it is vital to resolve the existing dispute between the HEB and the BIU as soon as possible,'' Mr. Mello wrote yesterday in a letter to Labour Minister the Hon. Irving Pearman.

"Accordingly I feel obliged to inform you that it is my firm view that the interests of the community require that I immediately resign from the panel.'' The panel is scheduled to begin hearings next Monday. Mr. Pearman said he will begin canvassing potential replacements for Mr. Mello. Depending on their previous commitments, he said, "it could take a day or a week.'' In addition to Mr. Mello, the three-member panel of the Essential Industries Disputes Settlement Board was made up of Canon James Francis and board chairman Prof. Ronald Haughton.

In the Supreme Court on Friday, the HEB argued that Mr. Mello's efforts to mediate in the dispute last year produced "a suspicion of a likelihood of bias''.

At that time, Mr. Mello urged both parties to return to the negotiating table "in the interests of the Country''. As such, the HEB argued, Mr. Mello was asking the HEB to give up its position and produce a more generous contract offer.

The Chief Justice rejected the idea that this amounted to bias, or even a suspicion of bias. Mr. Mello, the Chief Justice said, "expressed no views''.

According to several sources familiar with the dispute, the court case did not directly address the HEB's fundamental problem with the panel membership: Its belief the BIU has a representative while it did not.

Earlier this year, the Labour Ministry invited the HEB and the BIU to submit lists of suggested board members. Canon Francis appeared on the BIU's list but Mr. Mello's name appeared on neither list.

The HEB complained to the Labour Minister but was told the suggestions were only meant to be suggestions: The board was neutral and was not meant to contain representatives of either party.

It was then that the HEB sought legal means of changing the board's composition.

Mr. Mello, an experienced arbitrator, would not comment on his decision yesterday.

It is understood that Mr. Mello did not resign immediately because he felt the bias claims were wrong, and because he felt the new Disputes Settlement Board should not allow itself to become embroiled in disputes over panel members.

The board was created last year in an effort to bring quick resolution to labour disputes in the Islands' hotels, and avoid strikes and threats of strikes that could damage Bermuda's most economically important industry.

The board's only previous effort to settle a dispute, over the Grotto Bay Hotel's decision to end the mandatory gratuity system, proved unsatisfactory.

The hotel refused to participate in the hearings and then refused to implement the board's decision.

Board decisions are supposed to be binding but the BIU has so far not taken Grotto Bay to court.