Sturridge scored six goals in 30 appearances for Manchester City
A tribunal has ordered Chelsea to pay Manchester City £3.5m for striker Daniel Sturridge, which could rise to £6.5m depending on appearances.
City had hoped to recoup a "development fee" of £10m for the 20-year-old, who declined a new contract at Eastlands to join Chelsea last summer.
With Sturridge being under 24 years old City were due compensation.
Chelsea said in a statement they were happy with the ruling: "The initial fee is close to what we first offered."
Sturridge, who was young player of the year at Eastlands in 2009, will cost Chelsea an extra £1m if he makes an international appearance, with a further £500,000 due after first-team appearance 10, 20, 30 and 40.
City will also be due a 15% sell-on fee if Sturridge were to leave Stamford Bridge.
"Any subsequent payments are directly linked to the success of the player and that is satisfactory to us," added the Chelsea statement.
After scoring four goals in 26 appearances for City last season, Sturridge has found his first-team opportunities limited at Chelsea, starting three league and cup games and featuring four times as a substitute in the Premier League.
However, Sturridge, the nephew of ex-Derby striker Dean Sturridge, scored twice in Chelsea's 5-0 FA Cup win over Watford at the start of January to clinch his first goals for the club.
And with talismanic forward Didier Drogba away throughout January at the Africa Cup of Nations, Blues boss Carlo Ancelotti has voiced his belief that Sturridge can help to fill the void left by the Ivory Coast front man.
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