The Irish and Scots were furious at Welsh plans to enter the Ospreys, Scarlets, Blues and Dragons in a revamped Powergen Cup next season, reports the BBC.
It is understood that Italy have rejected proposals to replace Welsh teams in the Celtic League.
The Irish and Scottish unions hope Italy and Wales can be brought into a new tournament with them for the 2006/07 season.
As an addition to the league, Ireland and Scotland had been keen on a new 24-team Rainbow Cup competition including sides from South Africa and Italy for next year.
But Wales prefer the option of their four sides entering a money-spinning, revamped Powergen Cup alongside the top 12 English teams.
The Welsh Rugby Union (WRU) was criticised for failing to consult its partners.
However, WRU group chief executive, David Moffett, said the other unions were told about Welsh plans to enter the Anglo-Welsh cup and insisted the Celtic League remained the most important competition to Welsh clubs.
