ONE of Scotland's most renowned art galleries has admitted one of its paintings had been effectively looted by the Nazis in the 1930s and has agreed two Jewish families have a ''moral case'' for its return or financial compensation.

The still life painting, Le Pate de Jambon and attributed to Jean Chardin, is in the Burrell Collection. Glasgow City Council is to ask the Department of Culture, Media and Sport in London to help pay ''reparation''.

A committee of the council, dedicated to considering the repatriation of stolen art works, has judged in a new report that two unnamed German families have firmly established a case for recompense.

This amount could be (pounds) 100,000 if proved to be by the French painter, although experts judge the painting was by one of his followers and may be worth only (pounds) 20,000.

Sir William Burrell, Scottish shipowner and art collector, bought the painting in June 1936 from the German art dealer, Julius Bohler, for (pounds) 647.14s.

However, an investigation by the city council and new evidence from the families involved clearly show the painting fell into Bohler's hands because of financial persecution of the families by the Nazi regime.

Such cases are regarded as ''forced transactions'', in which the families have a clear right to the painting, or at least financial compensation.

The city, which does not want to lose the painting, is expected to pay compensation. It is ''reluctant to jeopardise the integrity of the collection by returning part of it''.

The report compiled by the Repatriation of Artifacts Working Group reveals the families are the heirs of an art house and gallery in Munich.

In 1935, the gallery was handed a huge tax demand despite a loss that year, and were forced to sell paintings. A clearance sale took place in Berlin, and included the still life, attributed to Chardin, which was sold for (pounds) 560.

Bailie John Lynch, the chair of the repatriation working group, said: ''I must point out that there is no evidence whatsoever that Sir William knew of the circumstances of the Berlin auction that led to his acquiring Le Pate de Jambon.''

The request concerning Le Pate de Jambon is the only one that the council has received since publishing in May 2001 a list of 232 works of art whose provenance or background could not be fully accounted for between 1933-45.