Coventry City, who had the midfielder as a youngster, are expected to get between £500,000 and £1m when the fee is decided.
Sturridge is out on contract at Eastlands on June 30th and as he is under 24, Manchester City are entitled to compensation.
However, the two clubs cannot agree a fee and now the matter will be decided by a tribunal.
It is not known whether City will get a payment from any future sales of the talented player or whether that money will be used by Ray Ranson to fund the purchase of new players.