West Ham to pay £20m over five years to settle Tevez saga

West Ham United are to pay £4m a year over the next five seasons as compensation to Sheffield United over the Carlos Tevez saga. No details of the deal, which was first revealed by The Independent last week, were released yesterday in a joint statement from the two clubs which finally, for them, draws a line under the affair.

The terms of the out-of-court settlement will remain confidential but by paying it in instalments West Ham, who were last night held to a goalless draw at Upton Park by West Bromwich Albion, have ended the uncertainty, secured their future and, crucially, avoided the threat of a one-off payment being imposed which they could not, because of the financial plight of their owner Bjorgolfur Gudmundsson, have met. It has, of course, come at a price.

A damages hearing was set for yesterday but was cancelled after the agreement was reached. The deal amounts to £20m, which is far less than the £45 to £60m being demanded by the Blades but also far more than the £5m-£10m that West Ham had hoped to pay after the independent inquiry into the Tevez affair, chaired by Lord Griffiths, ruled against them.

West Ham were concerned that Lord Griffiths would order them to pay all the money up front. If, for example, it was £14m, the figure they feared, they would not be able to meet that at the present time with Gudmundsson's businesses savaged by the global economic crisis. By spreading the payments they have made them more manageable, and they can be absorbed into the club's annual turnover and budget, although, to do so, they have also had to pay a premium of around £6m. The £4m-a-year figure will not be paid in one lump sum but in payments spread throughout the year, again, to lessen the impact.

Nevertheless, it amounts to a significant compensation package for the Blades, who were relegated from the Premier League in the 2006-07 season and had questioned whether Tevez should have been allowed to play for West Ham, who survived that season with the Argentine striker, who then moved to Manchester United, playing a key role.

West Ham believe they had a strong case to present to the damages hearing, having undertaken a detailed examination of the Blades' accounts and the costs of relegation, but were also deeply concerned the decision was subject to the vagaries of Lord Griffiths. The club's supporters will be angry that such a substantial sum is being paid.

In the end, the club has decided to make a business decision which means they do not have to sell any important players this summer and will be able to back the ambitions of their manager, Gianfranco Zola. It is hoped that the future of the club's ownership will also be resolved by then.

The chief executive, Scott Duxbury, whose position, contrary to some reports, is not under threat after hehas steered the club to a stable position both on and off the pitch and been in day-to-day charge, has held a series of meetings with the United chairman, Kevin McCabe, to thrash out a deal with an agreement being reached last Thursday.

Yesterday McCabe issued a statement which read: "We are happy and satisfied with the settlement with West Ham. Throughout the finalisation of the terms for the agreement, the discussions were friendly, cooperative and in the best of spirit with both the Blades and the Hammers advisory teams. We are two clubs with a fantastic footballing history who now want to move on and focus on the business of playing football – hopefully, for us, against the Hammers in the Premier League next season."

Duxbury said: "For everyone concerned the time was right to draw a line under the whole episode. We have had very positive discussions over a number of days with Sheffield United and acknowledge their willingness to resolve this in the best interests of both clubs."

As part of the agreement the Blades will drop the threat of any further action and have already made clear they will not support any legal steps taken by players.

West Ham were fined £5.5m in April 2007 by the Premier League for breaking the rules over so-called third party agreements when bringing Tevez and Javier Mascherano to Upton Park.

In the light of some of the comments made by Lord Griffiths, the Premier League and Football Association launched another inquiry in January. As part of that interviews will take place with key figures in the saga. As well as McCabe and Duxbury, these will include the former West Ham chairman and chief executive Eggert Magnusson, who chaired the meeting with Tevez's adviser, Kia Joorabchian, and his lawyer, Graham Shear, and the club's finance director, Nick Igoe. However, it is not expected that the inquiry will lead to any further punishment.

The settlement of the saga will still come as a huge relief to West Ham, who are chasing a place in European football next season – securing one would be a significant achievement, given the difficulties they have faced. The appointment of Zola by Duxbury has proved to be a great success and he has also expressed relief that the Tevez affair is at an end.