The Rebels, whose licence is held by a private company Imperium Sports Management (ISM) and run through the Melbourne Rebels Rugby Union (MRRU), have been identified by the ARU as being under review after governing body SANZAAR said it would reduce Super Rugby by three teams next season.
Two teams from South Africa and one from Australia, which the ARU have already said would be either the Rebels or Perth-based Western Force, would be axed from the competition against a backdrop of falling revenues and fan interest after the expansion to 18 teams last year.
The Force have already launched legal action against the ARU about the decision.
On Friday, the Rebels, through MRRU, issued a terse statement calling for compensation from the ARU over comments made by officials and senior management about the decision to dump one of the sides.
"We unequivocally reject that the ARU has any ability to chop or cut (ARU words) the Melbourne Rebels Super Rugby licence," MRRU said in a statement.
"Any representation by the ARU, including its Chairman, to that effect is legally incorrect and in complete conflict with the constitution of the ARU.
"The ARU's continued use of these terms and perpetuation of this myth continues to cause significant damage to MRRU and its players and staff.
"Patently through no fault of our own MRRU has suffered significant damage (financial, reputational, commercial and personal) by the ARU's handling of this whole process and its unnecessary public statements and actions.
"Given these actions MRRU has notified the ARU of its intention to seek compensation and at this time has reserved all rights."
MRRU added they had been previously assured by the ARU that the team, which became the fifth Australian side when the competition expanded to 15 in 2011, would not be targeted if there was any reduction in teams.
They were also surprised that senior ARU management had, over numerous years, expressed doubts on the financial viability of having five Australian teams in Super Rugby.
"MRRU notes that this concern was not conveyed to Imperium Sports Management prior to its acquisition of MRRU despite the full board and management of the ARU having the opportunity to do so," the statement added.
"MRRU is disappointed that its staff, players, members, fans and partners have suffered anguish and emotional distress... (and) immediately requests the ARU to put an end to this ongoing saga."
(Reporting by Greg Stutchbury in Wellington; Editing by Sudipto Ganguly)
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