West Ham United will up the ante in their multimillion-pound damages dispute with Sheffield United by approaching the Court of Arbitration for Sport (CAS). The East London club are exploring the possibility of the court in Lausanne hearing the case after Sheffield United won a compensation battle, thought to be the first of its kind at the highest level of football in England.

The Yorkshire club have claimed about £30 million in compensation, arguing that they were relegated from the top flight at the end of the 2006-07 season as a result of West Ham’s admitted breach of Premier League rules in the transfer of Carlos Tévez from Corinthians, the Brazilian club, two years ago.

The Argentina forward helped to rescue West Ham from relegation as they ended the campaign three points above Sheffield United. Tévez subsequently moved to Manchester United. “The club will consult lawyers before considering our next steps,” a statement from West Ham said.

Their misery was compounded last night when they were knocked out of the Carling Cup by lower-league opposition for the eleventh time in 21 seasons. Hayden Mullins scored an own goal away to Watford after Jan Lastuvka, the goalkeeper, misjudged a free kick midway through the second half of the third-round tie.

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Martin Samuel

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“I don’t want to find any excuse for the defeat,” Gianfranco Zola, the West Ham manager, said. “It has not been a great day for us. But I knew the match would be tough — it came at the worst moment. It is a big blow, but we will bounce back.”

Both West Ham and Sheffield United were informed of the judgment on Friday, after the dispute was considered in July by a three-man panel, made up of Lord Griffiths, a former president of MCC, Sir Anthony Colman, a former High Court judge, and Robert Englehart, QC. The panel will begin deliberating on the level of compensation at a hearing on October 2, but assessing the extent of the damages could take months.

The panel needs to consider the difference in television income, gate receipts, sponsorship and commercial revenue, as well as player sales resulting from relegation. The compensation is likely to be limited to one season’s income, although the sides could still settle out of court.

Kevin McCabe, the Sheffield United plc chairman, said that he felt vindicated by the judgment. He had written to the Premier League chairmen to outline his argument that West Ham had committed further offences that warranted investigation and had also expressed displeasure with the way that Richard Scudamore, the Premier League chief executive, handled the Tévez affair.

West Ham are pinning their hopes of overturning the decision on the CAS, but the arbitration process was conducted under the rules of the FA, which has said that its regulations do not allow a further right of appeal.

West Ham, who had no choice but to enter the arbitration proceedings, will argue that their appeal would be to the CAS, not the FA. But it remains unclear whether the court in Lausanne is permitted to look into another arbitration proceeding. In addition, arbitration is usually binding, unless it can be shown that the ruling was based on the incorrect use of the law.

Neil Warnock claimed that he would still be manager of Sheffield United had they not been relegated. He resigned and took charge of Crystal Palace. “The original FA [Premier League] ruling was a disgrace, but it is justice with this verdict,” he said.