Scottish Rugby Union (SRU) president George Jack has vowed to "vigorously" fight Edinburgh in court if the ongoing dispute between the Murrayfield neighbours ends with a legal battle.
In a letter to member clubs, Jack also insisted a court case would "in no way" impact on the SRU's ability to fund grass-roots player insurance, and the project devised to increase participation at all levels.
Jack refuted claims from Edinburgh owner Bob Carruthers that the SRU are "apparently insolvent" and urged followers of Scottish rugby to "challenge" such suggestions.
The row, which centres on Edinburgh's claim that they are owed a substantial six-figure sum by the SRU in overdue Magners League and Heineken Cup match payments, escalated when the club withdrew their 12 Scotland internationals from a week of World Cup training last month.
Jack wrote: "As we have continually reminded the new Edinburgh owners, the agreements between the union and Edinburgh Rugby form a binding contract and we expect Edinburgh to honour its obligations.
"This means, for example, that we expect Edinburgh to release players for Scotland duty.
"If they choose not to do so we will defend the union's position and as necessary protect our rights in the best interests of the game.
"Ultimately, this means that if Edinburgh decides to press its claims through the courts we will, albeit with a heavy heart, defend our position vigorously."
Jack rejected the suggestion that the SRU are close to insolvency, claiming the remarks were worthy only of "contempt".
"I would ask you to challenge such allegations wherever you come across them," he wrote.
"Our chief executive, Gordon McKie, informed us at our recent AGM that the SRU's 2007 financial statements will show a trading profit, albeit before any provision required for the closure of the Border Reivers.
"Our borrowings are down almost £2million to £19million.
"We have considerable headroom in our borrowing facilities, we have the full support of our bankers and we have very considerable asset backing in the form of our land at Murrayfield.
"Therefore I would suggest that you treat any reports to the contrary with the contempt they deserve."
Jack stressed that the SRU have "explored every avenue" in an effort to avoid a courtroom confrontation with Edinburgh officials.
Carruthers and brother Alex took charge of the Magners League side last year on a franchise basis, signing a five-year contract to run the club who were previously under SRU control.
Jack told the member clubs: "Your elected representatives on the Scottish Rugby Council have been kept fully up to date with regards to the dispute ... and have reported to the council that they are satisfied that the correct strategy in the best interests of Scottish - and Edinburgh - rugby is being pursued."
Jack added: "Those of you who know me will appreciate that the welfare of the players has throughout been at the forefront of my concerns. I am determined that whatever happens with Edinburgh, the impact of the current dispute on the players will be minimised."