French Court Orders I.M.F. Chief Lagarde to Face Trial Over Arbitration Case

PARIS — A French court ordered Christine Lagarde, the managing director of the International Monetary Fund, on Friday to face a criminal trial on charges of negligence dating to her time as finance minister, threatening to overshadow her second term at the helm of the organization.

France’s highest appeals court rejected an effort by Ms. Lagarde to have the case dismissed, setting the stage for a lengthy legal process that will most likely require her to spend more time in Paris, away from her duties in Washington.

The I.M.F. did not comment on whether Ms. Lagarde, who is the first woman to lead the organization, would need to recuse herself from her position during the trial. But in a statement on Friday, it said its executive board had been briefed on the situation and continued “to express its confidence” in Ms. Lagarde’s ability to carry out her duties. “The board will continue to be briefed on this matter,” the statement said.

Ms. Lagarde is accused of negligence while overseeing a politically charged 2007 arbitration case in which Bernard Tapie, a French tycoon close to Nicolas Sarkozy, who was president at the time, was awarded more than 400 million euros, or $440 million at current exchange rates, to settle a dispute with the state-owned bank Crédit Lyonnais.

Mr. Tapie, a former leader of the Adidas sports empire and a minister in the Socialist government of President François Mitterrand in the early 1990s, switched political allegiances to support Mr. Sarkozy’s presidential campaign in 2007. French investigators have been looking into whether Mr. Tapie was offered any kind of a deal in return for his support, and whether Ms. Lagarde may have been acting on Mr. Sarkozy’s orders by sending the case to an arbitration panel.

The large payout ignited a public outcry at the time, and Ms. Lagarde came under scrutiny for her role after she declining her advisers’ recommendations to appeal the decision.

She was eventually investigated for “abuse of authority” after failing to appeal the payout, but that charge was dropped. She now faces a lesser charge of “negligence by a governmental official,” punishable by one year in prison and a fine of €15,000.

The Court of Justice of the Republic, where Ms. Lagarde will stand trial, is rarely used. The cases before the 15-member body have mostly involved politicians, as former ministers are sometimes brought to trial when a new government takes over.