The Austrian officials stressed that the Leopold Foundation was eager to co-operate in resolving the dispute and had offered to turn the matter over to an international fact-finding body.

And Stephen M. Harnik, the New York lawyer representing the Leopold Foundation, said, "This is only the first step, really."

Indeed, it might be years before the Leopold Foundation gets "Portrait of Wally" and "Dead City" back.

Our difficulty is that there are competing interests, and we have a contractual obligation with the Leopold Foundation to return these pictures.

But last weekend the museum turned down their pleas, citing contractual obligations to the Leopold Foundation.

Instead, the museum said, the works would go back to the Leopold Foundation in Vienna on "Jan. 8 or shortly thereafter."

"Wally" arrived in the United States in 1997 as part of an exhibition of Schiele paintings lent to the Modern by the Leopold Foundation.

The Modern has joined the Leopold Foundation against the federal government, arguing that its obligation was to return the work to the institution that had lent it.

The works are owned by the Austrian-Government financed Leopold Foundation.

Museum officials said they have had extensive discussions with their counterparts at the Leopold Foundation since the claims were lodged last week.