The battle between Watermans and the Arts Council rolls on over claims that advice to continue Watermans' funding was ignored.

Watermans bosses claim to have discovered that two departments within Arts Council England (ACE) recommended that their funding should continue and that a cut would cause huge damage to the arts centre - but this was not passed on to the decision board.

The revelations came to light after Watermans issued a Freedom of Information Act request, allowing them to see how the decision was made. These documents reportedly reveal that the council knew that a cut of that size would have a devastating effect on the arts centre and the provision of Black, Asian and Minority Ethnic Arts in West London.

However this advice was not passed on to the executives responsible for making the destructive decision. Now Watermans is claiming that ACE is offering to reconsider their funding decision as long as Watermans does not move forward with a judicial review.

Chair of Watermans, Karam Bhullar, said: "Several months ago we offered to settle this matter with ACE (Arts Council England) without going to court and they declined. Now they have been found out, they are trying to settle it as quietly as possible hoping no-one will notice the damage that they have done.

"Jobs have been threatened, contracts with artists have been delayed and activities have been postponed and even cancelled.

"Watermans would have been delighted to have settled and expended its energies on planning for the launch of the 2012 Cultural Olympiad. Instead ACE's failure to recognise its own mistakes have allowed the action to drag on and cast a shadow over this once in a lifetime opportunity.

"I now hope this affair can be settled amicably and quickly before any more damage is done."

Watermans has asked ACE to give them temporary funding, whilst the issue of permanent funding is sorted out.