BORDEAUX (REUTERS) - A French appeals court ruled on Tuesday that an investigation could proceed into former president Nicolas Sarkozy for allegedly duping L'Oreal heiress Liliane Bettencourt into donating election campaign funds, a lawyer for her family said.

The decision means continued legal uncertainty for Sarkozy, whose supporters would like to see him make a new bid for the presidency in 2017. A final judgment in the case could take many months.

Sarkozy was placed under formal investigation in March for allegedly exploiting the mental frailty of France's richest woman after she was declared to be in a state of dementia, in order to raise money for his 2007 election campaign.

The decision of the court to proceed with the investigation was announced to reporters outside the court in the southwest cit of Bordeaux by Nicolas Huc-Morel, the Bettencourt family lawyer.

Sarkozy, a conservative who lost the May 2012 election to Socialist Francois Hollande, has denied any misconduct.

Under French law, a formal investigation means there is"serious or consistent evidence" pointing to likely implication of a suspect in a crime. It often, but not always, leads to a trial.

In July, lawyers for Sarkozy and 11 others placed under investigation contested a medical report that determined in 2011 that Bettencourt had been suffering from dementia since 2006.