Artworks which used to belong to a victim of Nazi persecution should not be returned to his family and can remain in a British gallery, a Government panel has decided.

Professor Curt Glaser, a prominent Jewish art historian, left Germany in the 1930s, after the Nazis forced him out of his home and his job. He sold his artworks, including a drawing by Renoir, to fund his escape.

The works were later sold on at auction to a collector, Count Antoine Seilern, who later left them to the Courtauld Gallery, in London.

Prof Glaser's surviving relatives claim the eight drawings should be handed over to them, arguing that he would not have sold them if it was not for Nazi persecution.

They say that because he was forced to sell them, he received only a fraction of their actual worth.

They also say that the money he was able to get was all spent on fleeing the country or was later confiscated from his German bank account.

However, a Government panel has turned down their claim saying their moral claim was "insufficiently strong" and ruled that the pictures can remain with the gallery.

The family have indicated that they will now take further legal action to recover the pictures.

David Rowland, a US-based lawyer representing Prof Glaser's heirs, said: "This is not about the money, it is about the principle.

"The works are not even particularly valuable. I'm sure the family would repay the amount Glaser got at the sale if it meant recovering the pictures. Besides, we don't feel that the prices he got make any difference, if the sale is caused by persecution."

The works date from the seventeenth to the early twentieth centuries and are mostly by Italian artists. Independent experts say the collection could be worth more than £35,000. The most expensive is a work by Renoir, called Laundresses, which could be worth up to £20,000.

The other works include An Architectural Sketch, attributed to Domenico Fossati, A Kitchen Still-Life, by Domenico Piola, a picture of Saint Charles Borromeo, by Giovanni Battista Crosato, A Group of Figures with Bacchus, by Giuseppe Bernardino Bison, The Flight into Egypt, by the same artist, Centaurs Embracing, by Lovis Corinth and The Lamentation, by an unknown artist.

The paintings were sold by Prof Glaser in Berlin in May, 1933. The previous month, he had lost his job as director of the Berlin State Art Library, following the introduction of a new law which allowed for the dismissal of Jewish civil servants – one of the first acts of Adolf Hitler's regime.

Prof Glaser also lost his state-owned apartment – where he kept his collection – which was converted into a headquarters for the Gestapo. Using the proceeds from the sale, he fled to Switzerland in July 1933 and then on to the US, where he died in 1943.

The decision not to return the works was taken by the Spoliation Advisory Panel (SAP), part of the Department of Culture, Media and Sport.

Made up of lawyers and art historians, the committee was established in 2000 to settle cases where people claimed items in British museums and galleries had been obtained as a result of Nazi persecution. It has so far dealt with nine cases.

The panel decided that although Prof Glaser was a victim of the Nazis and that this led to him selling the artworks, he had received "reasonable market prices".

It also concluded that he had "mixed motives" for leaving Germany since he wrote to his friend Edvard Munch, the artist, that he was happy to "unburden himself" from his possessions and leave Germany with his new wife, Maria Milch.

A spokesman for the DCMS said: "The independent panel has considered this case in detail and published their report, which ministers have accepted. We have no plans to revisit this case."

A spokeswoman for the gallery said: "We have had the independent advice of the panel. We wait to hear if there is new evidence from the claimants."