Edinburgh's dispute with the Scottish Rugby Union is heading for the courts after the governing body rejected the offer of independent mediation.
Bob Carruthers has been vocal in public about the dispute
It had appeared that the battle over Magners League and Heineken Cup fees was poised to be resolved.
But the SRU said it was no longer possible to accept the club's offer of arbitration due to "leaks of confidential information" to the media.
Edinburgh responded by saying "it will assert its rights through the courts".
The dispute revolves around franchise owner Bob Carruthers' claim that Edinburgh are owed a seven-figure sum from last season.
Peace appeared to break out in their bitter war of words last week when the SRU said it would discuss the possibility of mediation with its lawyers.
But, in a Tuesday statement, the SRU said: "Following the continued and extensive leaks to the media of confidential information and documentation in regard to the relationship between Scottish Rugby and Edinburgh Rugby Limited, Scottish Rugby has concluded that mediation is no longer an option.
Mediation offered the chance of a win-win outcome to this dispute
"Scottish Rugby takes very seriously any failure to abide by confidentiality agreements in regard to contracts and correspondence and believes the resulting publicity these leaks create is most unhelpful for the sport at all levels.
"Various members of the Scottish Rugby and Edinburgh Rugby Boards have been in discussion since the end of last year.
"But, despite some significant financial concessions by Scottish Rugby, agreement could not be achieved.
"This, together with Scottish Rugby's confidence in its robust contractual position, has led the national governing body to conclude that mediation will not achieve a compromise position which is acceptable to both parties.
"Scottish Rugby believes that the contractual rights and obligations of both parties are very clear and is confident that it is currently complying with its contractual obligations."
Edinburgh immediately issued a reply, pointing out that legal action was now inevitable.
"Edinburgh Rugby deeply regrets that the SRU has rejected Edinburgh Rugby's offer of mediation," it said.
"Mediation offered the chance of a win-win outcome to this dispute and the possibility of a creative solution to the present impasse and an agreed strategy for professional rugby in Scotland.
"It is therefore a great pity that the SRU and their advisers have chosen to reject this offer.
"Edinburgh Rugby's door remains open to any offer of mediation or negotiation from SRU.
"However, in the absence of an offer to mediate or negotiate directly, Edinburgh Rugby will assert it rights through the courts."
The statement attempted to clear up what it considered to be media speculation about the roots of the dispute.
Edinburgh's statement claims that the SRU has failed to comply with contractual obligations and that financial information it provided at the time of the sale of the club was inaccurate and misleading.
It said proceedings would be served withing the next two weeks.
Edinburgh also called for members of the Scottish Rugby Council to be shown the agreements between the parties and to intervene in the dispute.