IMF head Christine Lagarde failed Friday in her efforts to avoid standing trial for a disputed arbitration ruling that favoured a well-connected businessman when she was French finance minister, as a high court ruled the case would proceed.
The ruling by the Court of Casscation means Lagarde will have to stand trial in France, a scenario she has been fighting to avoid. Prosecutors also recommended dropping the case last September.
Lagarde stands charged with negligence related to an approximately 400-million-euro (440.7-million-dollar) payment to Bernard Tapie, part of a 2008 arbitration agreement between Tapie and the French bank Credit Lyonnais.
Critics have long argued that the deal was too generous to Tapie and have speculated that he only got it because of his political connections, including to then president Nicolas Sarkozy. Lagarde has consistently denied wrongdoing.
"The Court of Cassation, however, did not address the substantive question of Ms Lagarde’s alleged negligence," the IMF chief's lawyer, Patrick Maisonneuve, said, adding that he regretted the appeal was not upheld.
"The case will now be heard by the Court de Justice and I am convinced that the court will find the allegations of negligence to be without merit," he added.
Lagarde, who was in China for a G20 meeting, did not immediately issue a statement. In the past, she has called the accusations "completely groundless."
The IMF official appealed to the nation's high court in December to block the case going forward, with Lagarde's lawyer saying at the time that she "shared the prosecutors' view that there is no basis for any charge against her."
But the Court of Cassation rejected her appeal on Friday, meaning the case can now go forward. If she is found guilty, Lagarde could face up to one year in prison and a fine of up to 15,000 euros.
Lagarde has headed the IMF since 2011, taking over from former French finance minister Dominique Strauss-Kahn, who was forced to give up the post following a sex scandal.
Responding to the Court of Cassation decision, the IMF said it did not comment on ongoing judicial proceedings but said it retained confidence in Lagarde.
"The executive board has been briefed on recent developments related to this matter, and continues to express its confidence in the managing director's ability to effectively carry out her duties," the IMF said in a statement.