The legal ruling by the Court of Cassation, published on Wednesday, makes a new trial likely for Sarkozy, a former rightwing heavyweight who has faced a litany of legal woes since leaving office in 2012.
In March, he became France’s first postwar president to be sentenced to jail relating to his attempts to secure confidential information from a judge in return for the promise of a plum retirement job.
And in September, judges gave him a one-year prison sentence for illegal financing of his 2012 re-election bid, after his campaign team spent nearly double the legal limit.
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Sarkozy, 66, has appealed both rulings, and if they are upheld is unlikely to serve any time behind bars under French sentencing laws – though he could have to wear an electronic ankle bracelet.
In the Libya case, investigators allege he and his associates received tens of millions of euros from Gaddafi’s regime to help finance his election bid.
One of the associates, the French-Lebanese businessman Ziad Takieddine, has said he delivered suitcases carrying a total of €5 million from the Libyan regime to Sarkozy’s chief of staff in 2006 and 2007 – though he later withdrew the claim.
While in office Sarkozy became one of Gaddafi’s closest allies in the West, but in 2011 he was a driving force in the international military invention that drove the Libyan strongman from power.
Sarkozy has denied any wrongdoing.
“I can only regret this ruling, which nonetheless changes nothing with regards to the facts,” his lawyer Emmanuel Piwnica said Wednesday.