July 8, 2011 / 9:26 AM / 9 years ago

French court delays decision on Lagarde inquiry

PARIS (Reuters) - A French court has put off until August 4 its decision on whether to open an inquiry into the role of IMF chief Christine Lagarde in a 2008 arbitration payout, after one of the judges involved pulled out.

IMF managing director Christine Lagarde holds a news briefing at the International Monetary Fund headquarters in Washington July 6, 2011. REUTERS/Kevin Lamarque

One of the judges at the Court of Justice of the Republic, a special tribunal qualified to judge ministers, declared himself incompetent and a replacement judge needed extra time to get to know the case, court official Gerard Palisse said.

“One of the members of the panel let us know at a late stage that he had to declare himself incompetent,” Palisse told reporters at the court. “The panel has thus decided to put off the examination of this affair until Thursday, August 4.”

It was the second time the court has postponed its decision on whether to formally probe Lagarde over an affair that threatens to cloud her debut at the international lender if not quickly resolved.

Legal sources had told Reuters this week the court was likely to proceed with an inquiry into a possible abuse of authority by Lagarde in her approval of a 285 million-euro payment to a businessman friend of President Nicolas Sarkozy to settle a long-running dispute with a state-owned bank.

Lagarde, French finance minister until she took up her IMF post this week, has strongly denied any misconduct.

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.

“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.


If the court does decide next month to proceed with an inquiry, 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.

The start of any inquiry would in any case be delayed by several weeks as it cannot get off the ground until a replacement is found for Jean-Louis Nadal, the public prosecutor who recommended the inquiry but then retired at the end of June.

Nadal, the public prosecutor of France’s highest court until his retirement, 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 opposition Socialist Party lawmakers who accuse Lagarde of abuse of authority. The court was due to make a 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.

Writing by Catherine Bremer; editing by Andrew Roche

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