The legal question presented was whether the expropriation exception to sovereign immunity in Section 1605(a)(3) of the FSIA applied to a sovereign entity that was not alleged to have taken property in violation of international law.
Spain bought a collection from a Swiss-based Baron Thyssen-Bornemisza and started a museum based on the collection.
This is similar to the arrangement Austria has with the Leopold Museum. The Leopold's collection is now being researched at the insistence of the Jewish Community of Vienna, which held protests and roped off the entire Leopold Museum in yellow "crime scene" tape.
When you buy from the Swiss the type of art that Nazis liked to loot, you really ought to check the provenance. Shame on Spain. Let's hope they set up a commission to publicly investigate the collection and give back the things that have been stolen from murdered Jews.