In a statement published late on Tuesday night, the Ligue 1 club cited "unacceptable sporting and financial conditions" that Arsenal tried to impose for Saliba to stay in France and play one final game for Claude Puel's side.
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The London club recruited Saliba for €30 million in the summer of 2019 and loaned him back to Etienne for the 2019-20 season. Due to the coronavirus pandemic, the Ligue 1 season ended early and the Coupe de France final was pushed out to July 24, several weeks after Saliba's loan was due to finish on July 1.
On Tuesday morning, Arsenal boss Mikel Arteta expressed his desire to see the France under-21 international stay at Saint-Etienne and take part in the final against Paris Saint-Germain. Talks between the two clubs, however, appear to have broken down.
"We just wanted his loan to be extended to July 24 however, we could not find an agreement to enable the player to play the final," Saint-Etienne's statement read.
The disagreement most likely springs from the fact that there is a clause in the loan deal which says that if Saliba makes 17 starts for Saint-Etienne this season, Arsenal would have to pay an extra €2.5m transfer fee. So far the 19-year-old has started 16 times for Les Verts. Starting in the final -- which would be a very likely scenario -- would trigger the clause.
Arsenal are yet to respond to Saint-Etienne's statement.