Lise Thibault's lawyers had tried to invoke royal privilege last month to quash fraud charges against Thibault but Quebec Superior Court rejected the argument. It ordered her trial to proceed on Sept. 10.
She and her legal team will now appeal.
Marc Labelle, the lawyer for Thibault, had argued that his client should benefit from sovereign immunity because the Crown's prosecution cannot prosecute the Crown.
Thibault, who served as the lieutenant-governor from 1997 to 2007, has pleaded not guilty to two counts each of breach of trust, fraud and creating false or counterfeit documents.
The auditors-general of Quebec and Canada concluded in a joint report in 2007 that Thibault was reimbursed for $700,000 in expenses that were not related to her mandate.
Labelle's novel argument was based on the principle that the Queen can do no wrong, which dates back to the Middle Ages.
It raised the idea of whether the Crown could be prosecuted by the institutions it helped to create, and whether it was actually appropriate for a democratic institution to punish a figure who is constitutionally mandated to keep it in check and prevent abuses.