The Israel Museum is being asked to give away some 400 works of art that were owned by Jews who perished in the Holocaust.

Haaretz learned that the museum is currently negotiating with a new government company established to locate and restore assets belonging to Holocaust victims. The company is demanding the artwork, which the museum has had since its founding, on the basis of a new law stipulating that property whose owners perished in the Holocaust must be transferred to it.

If the company receives the artwork, it will try to locate its owners' heirs. If the heirs cannot be found, it will sell the works and use the money to help needy Holocaust survivors or support institutions that commemorate the Holocaust.

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The collection in the museum includes at least one masterpiece - Egon Schiele's The Town (die Stadt) of 1915 - as well as paintings by Alfred Sisley, Max Liebermann and Moritz Oppenheim. A few of the paintings are on display, but most are in the museum's storage rooms.

Shlomit Steinberg, the museum's curator of European art, said that most of the paintings are not highly rated artistically and so have never been exhibited. Most are 19th century portraits painted by German artists of the Academic school.

The paintings, which were plundered by the Nazis from private collections throughout Europe, were hidden, along with other treasures, in salt mines in southern Germany. At the end of World War II, they were found by the American army, which eventually gave them to the Jewish Restitution Successor Organization (JRSO), founded by the Jewish Agency. The collection was sent to Israel in 1951.

The Israel Museum, which received it when it was founded in 1965, has never released a full list of the paintings or tried to locate the owners' heirs. Museum officials said that they have never received any inquiries regarding the JRSO paintings, and that they did not try to restore them to the heirs because until now, there was no official body to handle property restoration. They stressed that they never concealed the paintings' origin, and near each exhibited painting, there is a notice saying that it arrived via JRSO.

The Knesset inquiry committee on locating and restoring the property of Holocaust victims, which was active from 2000 to 2005, did not deal with the JRSO paintings. Businessman Martin Stern, a member of the committee, told Haaretz: "Nobody claiming to be an heir to the paintings in the museum ever approached us. The fact that the new government company is now demanding them seems strange."

Officials in the government company confirmed that they are negotiating with the museum's management over the collection. The company's legal adviser, attorney Nadav Ha'etzni, said: "There have been quite a few cases in recent years of heirs who claimed ownership of paintings and won."

Ha'etzni said that the law requires the paintings to be transferred to the government company even if it is clear that there is no chance of finding the heirs. "The law establishes a moral principle - that nobody holding victims' property has the right to go on benefiting from it," he said.

The Israel Museum said that it received the paintings as Israel's national museum, which is committed to preserving the assets of the Jewish people for future generations. Museum spokeswoman Rachel Shechter said: "Anyone may view the paintings, most of which are in the museum's storerooms. In the near future, the museum will put all the JRSO paintings on its Internet site. Any legal claim will be considered with all due seriousness and concern."