The government purchased the shares without informing parliament as part of a campaign to increase its influence over Air France's KLM subsidiary, arguing that if it had announced its intention publicly it would have violated insider trading rules and increased the cost.
But the court said under the country's constitution, ministers "must inform parliament of such transactions in advance", and not present them with a done deal after the fact. "In our opinion, the transaction was therefore irregular," it said.
The decision is not related to current negotiations over a package of up to 4 billion euros in Dutch state aid for KLM as part of a wider French-Dutch bailout of Air France-KLM in the aftermath of the global coronavirus outbreak.
Finance Minister Wopke Hoestra paid 774 million euros for the Air France stake in February 2019. The stake is now worth about a third of that.
The court's findings do not carry any obligation to reverse the transaction, but it made a series of recommendations, including that the government should in future avoid such purchases without informing parliament.
In a reaction to the court's finding, Hoekstra said he had faced a "dilemma" due to conflicting rules on instructing parliament and also not disclosing information that could have affected Air France's share price.
"In consultation with parliament, new agreements have been made about a new way of handling disclosures of confidential market-sensitive information," he said. "These have been satisfactorily used recently in preparing the support measures for KLM."
He said his office would look at whether a law change was needed or possible.
© Reuters, aero.uk | Image: Air France-KLM | 20/05/2020 12:25