The Blades went down after the Premier League's independent panel did not dock West Ham points over the signing of Carlos Tevez and Javier Mascherano.

United have estimated the cost of their relegation at between �30m-�50m.

"We're extremely disappointed that Sheffield United have seen fit to embark on this latest desperate action," said a West Ham statement.

Statement: Sheff Utd spokesman Toby Craig

The Blades are seeking West Ham's agreement to go to arbitration through the Football Association in order to settle their claim.

A Blades spokesman said: "After consideration and discussion with our legal advisers Sheffield United are today initiating legal proceedings against West Ham United.

"We are seeking substantial compensation for our relegation from the Premier League.

"This action is distinct from the arbitration proceedings between the club and the Premier League during the close season.

606: DEBATE Surely United's case should be against the PL and not the Hammers SP

"We have always said that we will do everything in our power to secure justice for Sheffield United and restore the integrity of English football which has been tarnished by this affair.

"Once proceedings have been issued we will await a response from West Ham before making any further statements."

The Blades recently failed in their High Court bid to force the Premier League to take disciplinary action against West Ham.

United took their case to the High Court after an arbitration panel rejected their claim against the Premier League, which failed to deduct points from the Hammers over the transfers of Tevez and Javier Mascherano.

The Hammers were found guilty of entering into an agreement which allowed a third party to influence the club and of deliberately deceiving the League by failing to inform them of the agreement.

The independent commission's verdict in April said West Ham had committed "an obvious and deliberate breach of the rules" and held them "responsible for dishonesty and deceit."

The Hammers, who avoided the drop by three points, were fined a record �5.5m by the Premier League.

Among the panel's reasons for not docking points from West Ham was the fact that the club had changed ownership since the Tevez and Mascherano deal had been agreed.

However, Sheffield United claim West Ham failed to disclose vital information at the hearing.

A statement on the club's website read: "West Ham failed to disclose a critically important, additional third party agreement dated 1 December 2006.

"This particular information has only emerged in the last couple of weeks.

"It seems that West Ham concealed the existence of this document in order to shield its new owners, who have publicly maintained that they were innocent of any involvement in the third party agreement."

However, West Ham deny the Blades' claims.

Their statement read: "Not only does Sheffield United's claim lack legal merit, but it's based on their incorrect belief that West Ham withheld an agreement from the Premier League and the April disciplinary commission.

"In the meantime, West Ham and the new owners will not permit these repeated slurs to go unchallenged and are in discussions with their legal advisers in relation to the action they might take."