The government is struggling with a measure that would promote the cultural exchange of artworks and artifacts from abroad. This is no small matter. If Israeli museums are to mount world-class exhibitions - ones that generate enthusiasm and funds, both critical to a museum's survival - they must be able to borrow objects from abroad. Increasingly, however, international cultural loans come with serious strings attached - ones that could harm the claims of Nazi victims. Like exchanges between friends, museums lend cultural properties among themselves on the premise that these objects will be returned at the end of an exhibition, not confiscated by the borrower. If Israeli institutions want to borrow objects and to avoid becoming culturally isolated, the Knesset and the government must come up with some form of what is known as "immunity from seizure." This is a pledge that artworks and artifacts would be returned to the lender. That sounds fair enough - except that some of the artworks once may have belonged to a Jewish family from whom they were stolen by the Nazis. This is the predicament for the Jewish state: It needs an immunity law that satisfies the international standard for art loans, and it must simultaneously protect the interests of Holocaust survivors and their heirs who have claims for Nazi-looted art. Hundreds of thousands of Jewish-owned artworks were looted and displaced in Europe during the Nazi era. Although much has been returned, an unknown amount remains missing or unclaimed. In the last decade, governments, museums and the art market have become extremely sensitive to the problem of identifying Nazi-looted art, and any works that had been in Europe between 1933 and 1945 and have gaps in their provenance tend to be treated as "suspect." Artworks on loan around the world are vulnerable to seizure to numerous grounds, and some nations will not make loans without ironclad guarantees that the artworks would be returned. Russia, for instance, fears "cultural kidnapping," in which artworks are seized as financial assets to settle commercial debts. Or, without legal protection, artworks may be seized if people claim the works themselves had been stolen. Proponents say an Israeli immunity law would aid Holocaust survivors. The idea is that immunity would encourage cultural exchange, and through such public exhibitions Nazi victims and their heirs may be able to locate and identify art and artifacts that once belonged to their families. The immunity law does not bar Nazi victims from making claims for artworks, but those claims could not be made in Israeli courts. THIS IS the dilemma now facing the government, which proposed the immunity law, and the Knesset Education, Culture and Sports Committee. They seem to agree that an object could be granted immunity if its exhibition is of some public importance and if the loan to an Israeli institution is temporary. The committee, however, is concerned about the extent to which the law would recognize a moral obligation to safeguard Nazi victims' rights. MK Michael Melchior (Labor), who chairs the Education Committee, acknowledges the quandary. "I have a lot of serious problems with this law, with all the moral aspects of it, which are very clear to us, saying that they can't claim in the Jewish state things that were stolen from them during the Holocaust." In lieu of a survivor's ability to file a claim in an Israeli court, the Israeli government would provide immunity to artworks if there is a legal claims procedure in the country of the object's origin. In theory, this sounds reasonable. Many countries have some mechanism for recovering looted art that is in the custody of a national institution. There are spoliation panels and there are courts. In practice, though, these mechanisms usually are inadequate to the task. They impose onerous expenses on claimants to hire lawyers, translators and, often, researchers. Rather than help resolve a claim, the procedures often make claims financially prohibitive. Melchior also wants the government to go further, to publicly recognize its obligation to claimants, including financial assistance with claims. That is extremely unlikely. There is no question that immunity from seizure has dramatically enhanced cultural exchange around the world, and serves an important public purpose. There are those who have suggested that an Israeli immunity law could further aid survivors by imposing criteria calling for research and restitution procedures at lending museums. This overlooks Israel's weak position as a borrower. It cannot compel institutions to lend art; rather it must try to induce them. The British legal authority Norman Palmer once asked whether anti-seizure laws "are worth the moral anguish they may cause to Holocaust claimants." The message is that cultural exchange trumps victims' rights. And this important question has a broader meaning in Israel, which claims to be the representative of the Jewish people. As such, Israel should set the highest standard in protecting the rights and interests of Nazi victims. Israel could undermine its stance if it bars its citizens from pursuing their claims for Nazi-era losses in the Israeli courts. Further, there is a tragic irony in the genesis of this immunity debate. It began about five years ago when France - whose Vichy government was responsible for massive seizures of Jewish properties - offered to lend Israel some Old Master and Impressionist paintings. These particular paintings had dubious provenance. Unclaimed, they were among thousands treated as the so-called Mus es Nationaux R cup ration (MNR) collection, widely believed to have been looted from Jews. France was willing to restore the paintings to the original owners and heirs, it said, but only through a restitution process in France. Thus, it would not permit Nazi-looted Jewish paintings to be exhibited in the Jewish state without legal assurances that they would not be seized in Israel. In 1998, 44 nations came to the Washington Conference on the Holocaust-Era Assets and made a moral commitment to identify and restitute Nazi-looted art. Rather than insisting that Israel protect borrowed objects from seizure, nations could demonstrate their commitment to restore artworks by encouraging exhibitions and claims in Israel, not imposing roadblocks. The writer is the author of Confronting the Perpetrators: A History of the Claims Conference (Vallentine Mitchell).