£30m painting on sale to end row over art looted by Nazis

A painting by Egon Schiele could fetch up to £30 million when it is sold in London to settle a dispute over art stolen by the Nazis.

Proceeds of the Sotheby's auction will be used to compensate the family of a Jewish art dealer who lost another work, portraying the Austrian artist's mistress, when she fled to the capital in 1939.

Next month the Leopold Museum in Vienna is offloading one work, Häuser mit bunter Wäsche (Vorstadt II), so it can keep the other, Portrait of Wally.

After a US court ruling last year the museum agreed to pay $19 million (£11.52 million) to the heirs of Lea Bondi Jaray, who owned Portrait of Wally. It was taken from her apartment by Nazi Party member Friedrich Welz, who in-sisted it form part of the sale of her business to him when she left Vienna.

At the end of the war, US forces gave the work to the Austrian government, which gave it to the Austrian National Gallery. The gallery traded it to Rudolf Leopold in 1954 and he later put it in the museum he founded in his name. Mrs Jaray died in London in 1969.

But the family renewed its claim when the portrait was lent to the Museum of Modern Art in New York in 1997.

It was only returned to the Leopold Museum, which holds the world's greatest collection of works by Schiele, after the legal battle ended. Häuser mit bunter Wäsche will be sold on June 22 to compensate the family. The cityscape was painted in 1914 at the peak of Schiele's short career. He died four years later at the age of 28.

Peter Weinhäupl, the Leopold Museum's managing director, said: "While this painting will be missed, we are fortunate to hold eight further Schiele cityscapes of superb quality."