The New York-based Claims Conference, the main international body for distributing Holocaust restitution funds, has bowed to pressure from the Board of Deputies and agreed to allow new claims for compensation for properties seized by the Nazis in East Germany.
Until now, the Conference had resisted calls to reopen the application process to potential heirs after its deadline of 2004.
But a 2010 report, commissioned by the Board from Jeffrey Gruder QC, had urged the body to reconsider its stance.
On Sunday Board president Vivian Wineman announced that it had achieved a “major coup” after the Conference “agreed to a fund on terms no less generous than those we were requesting”.
It is understood that around £40 million will be set aside by the Conference to meet new claims.
After the reunification of Germany, the government agreed to return or pay compensation for assests confiscated by the Nazis or sold under duress by their owners.
The proceeds of heirless properties were retained by the Claims Conference, which has used the money mainly to fund welfare for Holocaust survivors, distributing more than £1.1 billion since 1992. However, the organisation faced criticism that it had not done enough to trace heirs.
Mr Gruder welcomed the reopening of the claims process. “If my report was a catalyst for this development, then that is pleasing,” he said.
Former Board vice-president Paul Edlin, who commissioned the report, said: “It vindicates my actions over many years to bring a measure of justice to those heirs to properties seized by the Nazis who have not yet received recompense.”
But Martin Stern, a longstanding critic of the Conference, said: “We still have not seen a list of properties online, as Jeffrey Gruder has insisted, to enable potential heirs to verify if they have a viable claim .We also do not know how the claims procedure will work, and for how long it is open.”
Claims Conference vice-president Greg Schneider said that it would be publishing a list of assets that it had recovered next January. New applications would be open for two years from the beginning of next year.
"At the end of two years, we'll see how may applications there are and the value and people will get a proportionate distribution," he explained. "If there is money left over, that will be used for home care for survivors."
The Conference has earmarked nearly £175 million for food, medicine and home care for Holocaust survivors from existing funds over the next two years. It paid £550 million to heirs of East German assets between 1992 and 2004.