The judicial authorities in New Caledonia have indicted the President, Philippe Gomes, for allegedly misusing his position over a 2005 and 2006 contract involving his private business.
He has been accused of misuse over his company's sale of 900 air conditioning units to a mining company which was given an operating licence by Mr Gomes, when he was the president of the southern province.
In an immediate reaction, Mr Gomes has ruled out resigning, accusing the prosecutors of undue zeal and suggesting that politics is behind the action.
Mr Gomes says he is astonished at the timing of the charges as they come amid his disagreements with other centre-right leaders in the territory.
The deal was for more than 1.3 million US dollars and dates back to the launch of the Goro Nickel project which has been taken over by Brazil's Vale company.
At the time, an environmental organisation accused him of corruption but investigative jusges dismissed the matter.