A French court judging ministers for crimes in office has ordered the managing director of the International Monetary Fund (IMF), Christine Lagarde, to stand trial over her alleged role in a payout case involving hundreds of millions of euros.

“IMF chief Lagarde is to stand trial over 400-million-euro ($434m) arbitration ruling,” a spokesman for Cour de justice de la Republique said on Thursday.

Local media in France say Lagarde, 59, was instrumental during her tenure as finance minister in the government of former President Nicolas Sarkozy in awarding the controversial sum as damages to Bernard Tapie, a backer of Sarkozy in the 2007 presidential election.

Tapie, once a minister, had sued the Credit Lyonnais bank over its handling of the sale of his majority share in Adidas in 1993, accusing the state-owned bank of deliberately undervaluing the company to defraud him.

However, according to a revised ruling in February, Tapie was then ordered to pay back the money with investigating judges probing whether the arbitration into the dispute, which was ordered by Lagarde, was a “sham” organized to reward Tapie for his support of Sarkozy.

The court decision on Thursday comes as a big surprise as France's top prosecutor had recommended in September that investigation into Lagarde’s alleged negligence in the affair be dropped.

A lawyer for Lagarde said he would recommend the high-profile IMF chief to appeal the decision.

“I will recommend Mrs Lagarde appeal this decision,” Yves Repiquet said on French TV channel iTele, adding, “It's incomprehensible.”

The IMF issued a statement, saying the body has “full confidence” in Lagarde.

IMF spokesman Gerry Rice said the body’s executive board, representing 188 member nations, “continues to express its confidence in the managing director's ability to effectively carry out her duties.”

The French finance minister has said that Lagarde can stay as IMF chief as she is “presumed innocent.”

This is the second time in four years that the top office of the global institution becomes involved in judicial proceedings. Former IMF chief Dominique Strauss-Kahn, also French, was forced to resign after being accused in 2011 of sexual assault by a hotel maid in New York.