IMF head Christine Lagarde must stand trial in France over a payment of €403 million (£340m) to tycoon Bernard Tapie, a French appeals court has ruled.

France's court rejected Lagarde's appeal against the decision to try her for negligence in her handling of the affair, which saw Bernard Tapie walk away with a massive payment in taxpayer money in 2008.

Bernard Tapie, a former French football team owner and some time pop star, won €403 million in 2008 in a case against the French public bank Crédit Lyonnais, after he said the bank undervalued his stake in Adidas. Christine Lagarde signed off on the payout as France's minister of Finance at the time.

Investigating judges later deemed the payout a "sham” after it was revealed that one of Tapie's lawyers had links to one of the judges.

Lagarde could risk a maximum penalty of one year in prison and a fine of €15,000 euros if convicted.

She is to stand trial at the Court de Justice de la Republique, which  deals with ministers accused of crimes related to their positions.

Her lawyer Patrick Maisonneuve expressed regret over the decision and said he was convinced that the trial would show she was innocent.

"I am convinced that the court will find the allegations of negligence to be without merit,” he said in a statement.

Stephane Richard, Orange chief executive, was also investigated by French police in connection with the Tapie payout. He was Lagarde's chief of staff when she was finance minister.

In January, the International Monetary Fund has appointed Christine Lagarde for a second term as managing director, despite the threat of the trial looming over her.

Lagarde, 60, who was the only candidate, was backed by the UK, Germany, China, and her home country, France, to stay on for another five years.