The tiny island of Sark, car-free and verdant, feels like it ought to be a haven of tranquillity and prosperity. But tensions between the island's fledgling parliament and the wealthy owners of the Telegraph Media Group, the Barclay brothers, may be harming Sark's future, an influential House of Commons committee is warning on Thursday.

Five years after feudalism was banished and the island's first democratic elections held, the justice committee has produced a report claiming that divisions between the new parliament and Sir David and Sir Frederick , who have a gothic mansion on the neighbouring island of Brecqhou, are threatening the stability of Sark.

The committee says "conseillers", the equivalent of MPs on the Channel island, feel they are being targeted by threats of legal action and subjected to "intimidating attacks" in a newsletter edited by the Barclay twins' manager on Sark.

But the committee also acknowledges that the brothers, who have invested millions in land and businesses on Sark, believe the island parliament has brought in legislation that discriminates against them – and are pushing for more constitutional change.

The committee concludes: "This is a very difficult atmosphere in which to work towards a sustainable economic future for the community on Sark. We deeply regret the apparently intractable discord on Sark."

Like Jersey, Guernsey and the Isle of Man, Sark is a crown dependency with its own independent administrative and legal system but Westminster has ultimate responsibility for "good government" on the island and the report opens up the possibility of the British government stepping in.

It says: "Just as the establishment of democratic government in Sark was a matter of good government, any threat to the ability of that system to operate fairly and robustly has the potential to raise good government issues which might require intervention."

Sark, a chunk of rock closer to France than the British mainland, hit the headlines in 2008 when after 400 years of feudalism ("Seigneur" Michael Beaumont was until then lord of all he surveyed) held its first democratic elections. The Barclays' preferred candidates failed to get elected and over the past five years the twins have been critical of the way the parliament, known as the chief pleas, operates.

The new committee report highlights evidence from former justice minister Lord McNally, who said there was "poison" on both sides of the divide.

He named the Sark Newsletter, a bulletin edited by the Barclays man on Sark, Kevin Delaney, which publishes fierce attacks on the chief pleas.

The newsletter claims Sark has become a "one party state" with a chief pleas which is composed of members elected because of their loyalty to Beaumont, compares it to the German government of the 30s and claims it is causing the island's economy to collapse.

McNally pointed out that "equally intolerant" views were expressed by those opposed to the Barclays in blogs. "In such a small community these things hurt, they cause resentment and they make progress more difficult," McNally said.

Also flagged up in the report are concerns about the pace of change – such as the three years it took Sark to separate the crucial roles of presiding officer of the chief pleas and the island's judge following the first election. McNally suggested that Sark needed to move forward more quickly: "I can see the attractions of going back to the quieter, more leisurely, more certain age it has, but Sark also has to provide a living for people. It has to have some economic future other than for retirees who have pensions that they have already made. It has to give a future for young people and for a working population."

The committee concludes: "Disputes between different interest groups on the island should not be allowed to get in the way of the responsibility of the authorities on Sark to continue to implement democratic processes and plan a sustainable future."

Both sides will find fault with the committee's findings.

Through their lawyer, Gordon Dawes, the brothers made it clear on Wednesday that they had no current litigation with anyone or any bodies on Sark. Any ongoing disputes were between Barclay family companies run by Delaney and the chief pleas. "They do not visit Sark, they do not vote on Sark," Dawes said. The brothers believe the justice committee is simply wrong to say that the government on Sark is run on democratic lines. Dawes added: "Their regret is that they ever invested in Sark at all."

Conseiller (and artist) Roseanne Byrne took a break from her water colours, to defend the chief pleas. "The conseillers are ordinary working people who have to earn a living but want to help create a future for the island. We're not professional politicians. We've gone from feudalism to democracy, a huge change – there's lots to do. All the time you are mindful that you could get a letter from the Barclays' lawyers or be attacked in the Newsletter."

Another conseiller, Sandra Williams rejected the idea that the change of pace was too slow. "I think Sark does things in its own time. We always get there in the end."