Lagarde, who was French finance minister at the time of the deal in favor of tycoon Bernard Tapie, is accused of negligence in the case. She has denied wrongdoing.
A special court ruled in December that Lagarde should stand trial, but she appealed. France’s Court of Cassation on Friday rejected the appeal.
Lagarde’s lawyers did not immediately respond to the decision. Lagarde, who was in China on Friday at a Group of 20 summit, has said she had acted “in the best interest of the French state and in full compliance with the law.”
The unusually generous 2008 arbitration deal, paid from public funds, prompted years of legal disputes that remain unresolved.
Tapie is a well-known businessman, politician and sometime actor in France. Among his many pursuits is owning sports teams. His cycling team La Vie Claire won the Tour de France twice — in 1985 and 1986 — and his football club Olympique de Marseille won the French championship four times in a row, and the Champions League in 1993.
But in 1994 he became embroiled in a match-fixing scandal and was later put under criminal investigation for complicity of corruption and subornation of witnesses.
After a high-profile case against public prosecutor Éric de Montgolfier, he was sentenced in 1995 by the Court of Appeals of Douai to 2 years in prison, including 8 months non-suspended and 3 years of deprivation of his civic rights.
Between1993 and 2008 a long legal battle transpired between Tapie and the Crédit Lyonnais bank. Crédit Lyonnais had allegedly defrauded Tapie in 1993 and 1994 when it sold Adidas on his behalf to Robert Louis-Dreyfus, apparently by arranging a larger sale with Dreyfus without Tapie’s knowledge.
In 2008 a special judicial panel ruled that Tapie should receive compensation of 404 million euro from the French Ministry of Finance, headed by Christine Lagarde. She did not to challenge the ruling.
The investigation began in 2011, soon before Lagarde was named to head the IMF in the wake of sexual assault allegations against her predecessor, French economist Dominique Strauss-Kahn. The executive board of the IMF has expressed confidence in Lagarde despite the investigation.
On December 3, 2015, a French court ruled that Tapie should return this compensation with interest, following investigation into alleged abuse of power by Lagarde. She is accused of negligence in her handling of the matter.
Negligence” by a person invested with public authority carries a risk of up to a year in prison and a 15,000 euro ($16,500) fine.
The decision last year to send her to trial had come as a surprise because a prosecutor had earlier argued that the case against her should be dropped.
She will be tried at the Court of Justice of the Republic, a special body that tries government ministers for alleged wrongdoing while in office. A date has not been set for the trial.
International Monetary Fund Managing Director Christine Lagarde speaks during a press conference for the 1+6 Roundtable on promoting economic growth at the Diaoyutai State Guesthouse in Beijing, Friday, July 22, 2016. The IMF called Friday to end uncertainty over Britain’s vote to leave the European Union she says is dampening global economic growth. (AP Photo/Mark Schiefelbein)
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