Saatchi Gallery halts talks over gift of £25m art to the nation

Millions of pounds' worth of important works by artists such as Tracey Emin and Damien Hirst could go abroad if a deal with Charles Saatchi to donate them to the nation falls through, it was claimed today.

The reclusive art collector announced in July that he wanted to donate more than 200 works, valued at about £25 million, to the nation, turning the Saatchi Gallery in Chelsea into a "Museum of Contemporary Art" for London.

But talks between Saatchi and the Arts Council have broken down — apparently over the issue of the new institution being part-funded by buying and selling works, contrary to the code of ethics of the Museums Association. Mr Saatchi is now said to be negotiating with non-publicly funded bodies.

The council, which does not run museums itself, and the Department for Culture, Media and Sport are both said to be wary of creating a new institution which would rival Tate Modern and could require public subsidy when arts funding is being curtailed.

Jane Morris, editor of The Art Newspaper — which last week warned that there might be "formidable problems" in carrying out Mr Saatchi's wishes — said: "I wouldn't dream of telling Charles Saatchi what he should or shouldn't be doing, but it would be a pity if some of these works did not end up in a public collection.

"Although he seems keen to keep the space as a gallery for a long time, the works are his and there is nothing to stop him doing what he wants with them, including taking them abroad or selling them."

The Saatchi Gallery said it had broken off talks because it was "not comfortable" working with the council, adding: "We are in conversation with several other potential recipients."

The works include Hirst's The Physical Impossibility of Death in the Mind of Someone Living and Emin's My Bed.