In this story: 'It's not the end' 'Unholy trinity' RELATED STORIES, SITES

BRISBANE, Australia (CNN) -- Australia's ultra-right One Nation party faced a rebellion within its ranks Friday, after three of its elected members of parliament quit and seven others threatened to desert unless President Pauline Hanson and two directors resign to make way for a leadership vote.

The 10 MPs from the state of Queensland said the party was no longer democratic and demanded that Hanson, David Oldfield and David Ettridge agree to an open ballot at the party's annual meeting February 28.

While appearing to agree to the vote, Hanson rejected the criticism.

"We are a very democratic organization," she said in an interview with an Australian television station.

Hanson said her position as president of One Nation was always open to a vote under the party's constitution, adding that she was confident she would continue to lead her party.

"It was always written up in our constitution that our positions were not concreted forever and a day," Hanson said. "It is written in our constitution that our positions would go to the vote by the members of One Nation, so you see they have misread our constitution."

Hanson, a former owner of a fish and chips food shop, made international headlines when she founded the One Nation party in 1997 with dire warnings that Australia was being "swamped by Asians."

The party made a dramatic electoral debut in Queensland in June 1998, when it grabbed almost a quarter of the votes and 11 seats on an anti-immigration and protectionist platform.

Oldfield, widely considered a key to Hanson's success, rejected the ultimatum by the mutinous parliament members to step down, but said he would be happy to face a leadership vote.

Queensland Premier Peter Beattie said the shrinking One Nation might be stripped of its party status in state parliament, meaning a loss of $1.2 million in Australian funds ($780,000/U.S.) in staff and resources over three years.

"The money might be better off used for things like law-and- order initiatives, schools and hospitals," Beattie said.

But party officials said the mutiny would not sink One Nation.

"No, it's not the end," said Oldfield, who is campaigning for the March 27 New South Wales state election. "The sun will come up, we'll keep going," he added.

The parliament members, who issued their ultimatum in a letter to Hanson, said they wanted not only democracy, but accountability within the party.

"I have resigned," said One Nation lawmaker Ken Turner, who will become an independent. "We need a democratic system."

In response to internal criticism, One Nation has issued a draft constitution, but some members said it ensures that Hanson, Oldfield and Ettridge remain unelected leaders for two years.

"Pauline has stood for democracy since day one ... and she should allow the people to vote. The chances are that they will be re-elected, possibly unopposed," said Dorothy Pratt, deputy party leader in Queensland, and another of the parliament members who quit.

Australian Employment Services Minister Tony Abbott, who sacked Oldfield from his staff before Oldfield joined One Nation, is one of the party's strongest critics.

"They thought they were joining a democracy, they've discovered it's the church of the unholy trinity," he said.

Hanson lost her seat in the federal parliament at the last general election.

One Nation's only federal representative is Heather Hill, a member of the upper house, and even her position is at risk.

Lawyers say she is likely to lose an upcoming court case over whether her British citizenship disqualified her from contesting the last general election. Hill took out Australian citizenship just days before declaring her candidacy.

Reporter Hugh Williams and Reuters contributed to this report.

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