Chelsea coach Steve Clarke has quit to join Gianfranco Zola at West Ham, sparking a bitter compensation battle between the rival clubs.

Stamford Bridge officials today insisted they had not given permission for the Hammers to speak to the Scot and are refusing to accept his resignation.

But Clarke is determined to cut his ties with the club, despite a last-gasp bid by Luiz Felipe Scolari to persuade him to stay.

The Chelsea manager said: "Yesterday I invited Steve to my house to discuss the situation with West Ham and his project for his life.

"I open the door for Steve and when I listened to his project I told him that I am the coach to open more doors for you to become a manager in England.

"I said I would give him more responsibility in my team and in Chelsea. I also said that I would let everyone know that Steve wants to fly alone in the future.

"I don't know what's happened since I met with him but I arrived today to find out he has resigned. Sometimes we think our best direction is one way when it is another. I don't agree with his decision."

Talks between the two clubs over compensation broke down yesterday with no settlement reached. Chelsea are thought to be demanding about £1.5m for the 45-year-old, who has two years left on his contract.

A Chelsea spokesman said: "We can confirm that West Ham have made an approach with regards to talking to Steve Clarke. They have not been given permission to talk to him.

"Steve has tendered his resignation as assistant first-team coach. We have not accepted his resignation. Talks are continuing."

Clarke has spent 20 years at the club as a player and coach and is a popular figure with the fans. However, he became unsettled under Scolari's predecessor Avram Grant and also clashed with former assistant Henk Ten Cate.

Zola, a former team-mate of Clarke, started his new role at Upton Park yesterday and, as revealed by Standard Sport, immediately moved to recruit him as No2.

A compensation claim is the last thing West Ham need given the financial problems facing the club following the collapse of shirt sponsor XL.

The holiday company, which has two years remaining on a three-year £7.5m deal with the Hammers, has gone into administration blaming fuel prices and the economic downturn.

A West Ham spokesman said: "In effect, the sponsorship agreement is almost certainly at an end. We have to look at branding issues on West Ham materials, including shirts, over the next few days.

"There are outstanding payments but the situation has to be clarified with the administrators."

Crawley-based XL have financial links to Icelandic bank Landsbanki, which counts West Ham owner Bjorgolfur Gudmundsson as its major shareholder.

Gudmundsson funded a major spending spree on new players following his arrival at Upton Park in 2006, but the club spent little in the last transfer window season and sold nearly £20m worth of talent.

The Hammers are now faced with finding a new main sponsor amid tougher worldwide economic conditions.

Kevin Keen, the current reserve team coach, will take charge of the team at West Brom tomorrow - with 42-year-old Zola taking control of first-team affairs next week.

Alongside Clarke, Zola will have former Chelsea, Monaco and Juventus fitness coach Antonio Pintus working with the team.