French businessman Alexandre Djouhri appeared at a London court after being detained on Sunday at Heathrow airport on a European arrest warrant.
The judge ordered a 1 million pound bail be paid to secure the 58-year-old's release.
Wearing a dark suit with a white shirt, frequently tightening the knot on his dark blue tie, Djouhri was ordered to stay at his daughter's home in the British capital.
Embroiled in an investigation into the suspected Libyan financing of Sarkozy's 2007 election campaign, he has refused to respond to summons for questioning in Paris.
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The Swiss resident has been a focus of the inquiry opened in 2013 by judges investigating claims by former Libyan ruler Moamer Kadhafi and his son Seif al-Islam that they provided funds for Sarkozy's election effort.
French investigators are examining Djouhri's alleged involvement in the 2009 sale of a villa in the French Alps, for around 10 million euros, to a Libya investment fund managed by Bashir Saleh.
Djouhri is suspected of being the true owner of the villa, which was sold at a "very inflated" price, a source close to the inquiry told AFP.