PARIS (Reuters) - A French court will decide on Friday whether to launch a legal inquiry into the role of IMF chief Christine Lagarde in a 2008 arbitration payout, a move that could cloud her debut at the international lender.
The Court of Justice of the Republic, a tribunal qualified to judge ministers, has been examining whether or not there are grounds to suspect an abuse of authority by Lagarde. Legal sources say it is likely to opt to proceed with a formal probe when it announces its decision during the morning.
Lagarde, French finance minister until she took up her IMF post this week, has denied any misconduct in her approval of a 285 million-euro payment to a businessman friend of President Nicolas Sarkozy to settle a dispute with a state-owned bank.
There is no evidence she gained personally from the affair, but a legal probe would be embarrassing as the International Monetary Fund tries to turn a new page following the resignation of Dominique Strauss-Kahn as managing director after he was charged in New York with assaulting a hotel maid.
France's cumbersome justice system means a probe could run on for years, hanging over Lagarde as she tries to make her mark at the IMF and win over critics, particularly emerging nations angry at Europe's grip on the Fund's top job.
On the other hand, an inquiry could take months to actually get off the ground as it cannot start until a replacement is found for Jean-Louis Nadal, the public prosecutor who recommended the inquiry but then retired at the end of June.
"Whether the court decides to pursue investigations or not, I have exactly the same confidence and peace of mind," Lagarde, a former high-flying lawyer and chairman of U.S. law firm Baker & McKenzie, told France 24 television this week.
Nadal, the public prosecutor of France's highest court until his retirement this month, recommended earlier this year that the Court of Justice open an inquiry into Lagarde's role in the Tapie payout.
His recommendation came at the request of lawmakers from the opposition Socialist Party who accuse Lagarde of abuse of authority in the affair.
The court was initially due to make its decision in early June, but judges asked for more time to weigh the evidence.
If an inquiry is opened, a panel of judges at the court would need to wait for a full report on the case which would be put together by whoever replaces Nadal. The procedure for appointing his successor cannot start until the autumn.
A former left-wing government minister who switched sides to support Sarkozy's 2007 presidential campaign, Tapie was paid to settle a long-running dispute with former state-owned bank Credit Lyonnais. He had accused the bank of defrauding him during a 1993 sale of his stake in sports giant Adidas.
Lagarde agreed to drop the judicial proceedings and submit the case to a private arbitration panel, overruling some in her ministry who argued that it should remain in court.
Her accusers say she ignored recommendations to check if the arbitration was legal and appeal against the size of the award.
Lagarde, who faced the media on Wednesday at her first news conference as IMF head, has repeatedly said allegations of abuse of authority are unfounded and politically motivated.
(Reporting by Jean-Baptiste Vey; Writing by Catherine Bremer; Editing by Andrew Roche)