The Court of Justice of the Republic (CJR), which examines ministerial misconduct, will grill Lagarde over her role in the 285 million euro payout ($366.5 million) to Bernard Tapie, a businessman and former politician.

Tapie was paid the money following arbitration, in a dispute in which he alleged the former state-owned bank Credit Lyonnais defrauded him in the sale of his share in the sportswear company Adidas, in 1993.

The investigation is looking into whether Lagarde abused her authority as finance minister when in 2007, she referred the dispute between Tapie and the state to binding arbitration. Lagarde reportedly overruled objections from advisers to go ahead with the arbitration.

With interest, the amount paid to Tapie, a one-time Socialist minister who served time in jail for match fixing during his time as president of the Olympique Marseille football club, came to more than 400 million euros. Prosecutors suspect he may have received favorable treatment in return for supporting Sarkozy, Lagarde's former boss, in the 2007 and 2012 presidential elections.

Lagarde has not been charged with any crime and is not accused of having financially profited herself from the payout. She has denied any wrongdoing. However she risks being placed under formal investigation at the hearing..

"It's a pleasure to see you," a smiling Lagarde told reporters as she arrived at the court on Thursday. The hearing could last into Friday.

In April, a spokesperson for the International Monetary Fund said Lagarde had the board's backing, and current Finance Minister Pierre Moscovici has told France's Le Monde newspaper she has the French government's support. However, he said the government would appeal against the arbitration award if Lagarde was placed under formal investigation.

If that happens, it points to probable implication of a suspect in a crime, with the existence of "serious or consistent evidence" supporting such a move, which is a step closer to trial. However a number of these types of investigations have been abandoned without any trial.

Criticism of Tapie payout

The payout Tapie received allowed him to clear huge debts, and media reports say a leftover sum of between 20 and 40 million euros ($25.7-51.5 million) financed his career relaunch.

Critics say the state should not have taken the risk of being made to pay compensation to a former bankrupt and convicted criminal, who at the time did not have the means to pursue the case. The current case is as a result of a complaint filed by left-wing lawmakers.

jr/hc (Reuters, AFP)