Sark's government may face further problems over constitutional reforms.
The Chief Pleas will have to reconsider the options available
A compromise featuring a elected officials and a government retaining some of the historic role of landowners had been agreed last month.
But at the Chief Pleas meeting on Wednesday, Seigneur Michael Beaumont warned the proposal might not be approved by the UK Privy Council.
It is thought it could be challenged in the European Court of Human Rights for not being democratic enough.
Chief Pleas will now have to reconsider the options available.
Sark is Europe's last feudal state. Its current system of government is made up of deputies elected by the people and tenants who choose representatives from among their number to sit in Chief Pleas.
A previous attempt to update the system in favour of more elected deputies was blocked by the owners of the nearby island of Brechqou.
Billionaire brothers Sir David and Sir Frederick Barclay said both the current and proposed system broke European human rights laws.
Their concerns began when Sark refused to allow one of their daughters inheritance rights.
The Chief Pleas sought legal advice and drew up four new versions of the constitution after inviting Sark residents to make their views known.
Sir David and Sir Frederick Barclay blocked a previous plan
Mr Beaumont told BBC News he had been advised the proposal could possibly be challenged.
He said another draft version could be considered or Chief Pleas may decide to push the proposal forward to see if it is approved by the Department for Constitutional Affairs and the Privy Council.
"We'll have to wait and see. If it is turned down, it will have to be revised", Mr Beaumont said.
Deputy Paul Armogie described it as a major setback.
He said: "It's been a long haul to get to this point and we finally thought we'd turned the corner."