The International Monetary Fund says that Christine Lagarde, the newly-appointed Managing Director, will be able to fulfill her duties despite possible legal action against her. A French Court of Justice announced Thursday that it will open an investigation on the IMF chief for her role in a 400 million US dollar arbitration deal in favor of a controversial tycoon.

New IMF chief Christine Lagarde

Lagarde was France's finance minister when magnate Bernard Tapie won a settlement in 2008 with a French state-owned bank over the mishandled sale of sportswear maker Adidas in the 1990s. A prosecutor says he suspects that Lagarde overstepped her authority in allowing the arbitration to go forward. It is likely to be months before the investigation is completed and a decision is made on whether to send the case to the special court for a trial.

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