Champions League bans ICL players
Organisers of the Twenty20 Champions League say qualifying teams from England will not be able to field players who featured in the rebel ICL.
The top two teams in domestic Twenty20 in India, England, Australia and South Africa will qualify for the multi-million pound event in India.
But English teams will be barred unless they agree not to play cricketers who featured in the Indian Cricket League.
Counties have so far fielded ICL players in the Twenty20 Cup.
And only three of the 18 - Essex, Middlesex and Somerset - do not have players who have signed ICL contracts.
The finalists of the Twenty20 Cup in England in August qualify for the lucrative Champions League - which will take place over eight days at the start of October.
Board of Control for Cricket in India vice-president Lalit Modi said: "India will not host or participate in any event featuring players from the ICL."
Modi is chief organiser of the ICL's rival, and officially sanctioned, Indian Premier League.
He added: "England Cricket Board's officials told us that laws in Britain do not permit them to restrict participation of players.
"That be the case, England's teams will not be able to play in the Champions League staged in India. It'll be very sad, but we have our own rule."
Cricket Australia is drawing up the rules and playing conditions of the tournament and is expected to confirm them at an International Cricket Council meeting in Dubai next week.
And on Sunday an ECB spokesman told BBC Sport: "This is a venture between four counties and we are awaiting for Australia to come up with the rules and regulations.
"We are expecting that to take place next week in Dubai."
During the ongoing English Twenty20 Cup, teams have steadfastly refused to pull out ICL players because they said the rule was unclear.
The likelihood is that the two counties qualifying from England will have ICL players, and if those players are subsequently withdrawn from the Champions League, legal implications would be inevitable.
Speaking to the BBC Sport earlier in June, ICL lawyer Jeremy Roberts said: "There is certainly the possibility we will take legal action.
"It would be a restraint of trade. The legal action could be against the ECB, it could be the ICC.
"We would be very, very, very reluctant to take any action against the countries. We have tried to be really supportive of them and see them as innocent victims in all this."
According to reports, two Pakistan sides are being lined up if the qualifying English counties refuse to drop their ICL stars.
But BBC Sport understands the ECB could invite alternative counties to represent England if the leading ones insist on keeping the "rebel" players.
India will field the Rajasthan Royals and the Chennai Super Kings, Australia are represented by Victoria and Western Australia, and South Africa have entered the Titans and the Kwazulu-Natal Dophins.
None of those teams have ICL connections. The team picking up the first prize will win US$5m (£2.5m).