Michael Cassidy, chairman of the City's planning and resources committee, said yesterday that talks with Sir Peter Levene, who heads Canary Wharf, were "not making as good progress as planned".
He said the London Docklands Development Corporation, which until 1998 regulates development in the former docks area of which Canary Wharf is the flagship scheme, had refused to be party to a protocol that commentators had dismissed as an attempt to stitch up the London property market.
According to Mr Cassidy, who met Michael Pickard, LDDC chairman, on Monday evening, the Docklands authority was not prepared to sign up to an undertaking that property developers would not poach City tenants.
In return, it is understood the Corporation would have excluded firms in Docklands from a forthcoming campaign to woo back organisations that had left London over the past decade.
The plan, discussed at a meeting between the two last week but now likely to be scrapped, would have put an end to a long-running dispute that has periodically blown up in public criticisms of each other's schemes. It was planned to put an end to what has become cut-throat competition for new tenants.
The latest acrimonious exchange followed Canary Wharf's success in attracting BZW, the investment banking arm of Barclays, to Docklands. The bank is moving 1,800 staff from the City to Canary Wharf.
Mr Cassidy had claimed that BZW would lose 40 per cent of its staff because of the move and said the extra pay the firm was having to pay its workers to compensate them would add up to the equivalent of £5 a square foot on the rent.
He was speaking as the corporation opened a dedicated hotline for property developers designed to offer help and advice on proposed schemes in the City, sorting out problems in implementing planning consents, identifying demand and finding sites for new projects.
The hotline is part of a £2.6m three-year programme to enhance the Square Mile's status as one of the world's three leading financial centres.
According to Mr Cassidy, it received a big boost this week when English Heritage agreed to consider proposals to demolish listed building facades if they were isolated and not part of significant groupings of buildings.