* EADS to award golden shares to UK, France, Germany
* Special share would prevent predators exceeding 15 pct
* EADS may argue civil, defence technology intertwined
* EU treaty exempts arms from open internal market
By Foo Yun Chee
BRUSSELS, Sept 17 (Reuters) - A plan to issue golden shares in a merged EADS and BAE Systems to France, Britain and Germany faces a close examination by EU regulators wary of the their impact on competition and free movement of capital across the 27-country bloc.
Even though EU laws allow golden shares to protect companies on national security grounds, the European Commission has generally been reluctant to approve them.
The merger being discussed by EADS and BAE Systems would create the world's biggest aerospace and defence company with combined sales of $93 billion for products ranging from Airbus jetliners to Typhoon warplanes and nuclear-powered submarines.
"Golden share questions are always a tricky one. The Commission's been quite reluctant to agree. What you are asking for is more than what the company statutes provide for," said Michael Schuette at Schuette Law.
"I think the companies could propose concessions to alleviate any concerns the Commission might have," Schuette said.
Negotiators assembling the deal could also make it clear that government veto rights would only be exercised under strict conditions, said an antitrust lawyer.
"Such provisions will have to be wrapped very narrowly," she said.
Sources familiar with the deal said the special shares awarded to Britain, France or Germany under the proposed deal would allow them to prevent a predator obtaining a voting stake of more than 15 percent for security reasons.
A similar system is already in place at BAE Systems.
BAE's statutes forbid a foreigner or group of foreigners from controlling more than 15 percent of the shareholder votes. A change can only be made with the approval of the UK government.
The European Union's founding treaty allows states to take action to protect trade in "arms, munitions and war materiel" as long as this does not "adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes".
EADS, which owns commercial airplane maker Airbus, is expected to argue that civil aerospace products share the same underlying technology as defence and therefore that the whole company should benefit from the same protections.
"I think if one company made cheese and the other missiles it might be more difficult, but here you are talking about helicopters, satellites and all sorts of equipment with dual use technology," said a person familiar with EADS thinking.
"It is very difficult to imagine how one could challenge the ability of states to make sure an entity such as this does not fall into hostile hands for security reasons," the person said, asking not to be identified.
EADS declined to comment.
Defining what is military business and what are civil operations could also help the companies justify the national interest argument to regulators.
"The companies have to sort out what are the military and non-military bits. The distinction is key," said an antitrust lawyer and former senior official at the Commission's competition unit.