French court delays decision on IMF chief Lagarde

July 8, 2011 - 9:14 AM
IMF Lagarde

New International Monetary Fund (IMF) Managing Director Christine Lagarde gestures during her first news conference at the IMF in Washington, Wednesday, July 6, 2011. (AP Photo/Susan Walsh)

PARIS (AP) — The new chief of the International Monetary Fund won a legal reprieve Friday when a French court delayed a decision on investigating whether she overstepped her authority in a divisive euro285 million ($406 million) arbitration deal.

Christine Lagarde, who took the helm of the IMF this week, has her hands full even without a judicial probe to worry about. She must tackle resurgent fears about Europe's debts, and revive confidence in the fund after her predecessor quit to face charges he tried to rape a New York hotel maid.

The potential French probe has dogged Lagarde since before she was appointed to head the IMF last month.

Lagarde was France's finance minister at the time of a 2008 arbitration deal for French magnate Bernard Tapie. Tapie won what some called a too-generous private settlement with a French state-owned bank over the mishandled sale of sportswear maker Adidas in the 1990s.

A French prosecutor wants an investigation into Lagarde's role in the deal, saying he suspects she abused her authority. Critics have said she should have challenged the independence of one of the arbitrators, and should have appealed the arbitration decision.

A commission at the Court of Justice of the Republic convened Friday to decide whether to launch an investigation.

In a surprise announcement, the court said it had to delay its decision until Aug. 4 because one of the judges on the panel said he didn't want to be involved in the case.

"One of the members of the panel let us know, belatedly, that he was obliged to recuse himself," Gerard Palisse, who presides the panel, told journalists. He gave no reason for the judge's decision.

It was the second such delay for the court, a special body that handles cases involving government ministers.

Lagarde's lawyer was not immediately available for comment Friday.

Lagarde said on France-24 television this week that whether the French court decides to investigate, "I have the exact same confidence, and same sense of calm."

Any investigation, if launched, would take months and might not necessarily result in a trial.

While Lagarde was finance minister, she won praise for her role in international negotiations during the global financial crisis and Europe's debt troubles

After the legal troubles her predecessor faced, Lagarde's IMF contract says she is "expected to observe the highest standards of ethical conduct" and "shall strive to avoid even the appearance of impropriety in your conduct." Lagarde will also undergo ethical training, the contract states. Strauss-Kahn's contract did not include such language.

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Angela Charlton in Paris contributed to this report.