The European Commission warned France and Germany on Friday not to introduce "golden shares" at aerospace group EADS as a tool to ward off potential foreign predators.
"The general view on golden shares is clear. The European Commission doesn't think golden shares have a place in the single market," European Commission spokesman Oliver Drewes told a regular news briefing when asked about the situation at EADS.
The issue highlights concerns about how much control state-backed investors should have over companies such as EADS, whose products are crucial for national security.
Arguing that free movement of capital is at stake, Brussels has been campaigning against golden shares, which give states special rights in publicly listed companies.
In Berlin, a government spokesman said Germany and France had been in talks since last year over how to safeguard government interests in the flagship company.
"As far as I know the talks have not yet finished," spokesman Ulrich Wilhelm told a news conference.
German carmaker Daimler AG, a major EADS shareholder, said owners of the Airbus parent had not agreed any steps that could limit the influence of foreign investors in the European aerospace group which makes the Eurofighter jet, missiles, rockets, helicopters and satellites.
"There are no decisions yet on this subject and no timetable for a decision," a spokeswoman said, declining further comment.
An Airbus spokesman said: "This is a matter for EADS shareholders."
EADS shares eased 1.3 percent to 17.50 euros by the market close in Paris, in line with the French blue-chip index.
Funds in Focus
The Financial Times newspaper cited people close to the talks as saying France and Germany were finalising changes to corporate by-laws to prevent foreigners building large stakes in EADS.
The French government, French media group Lagardere and Daimler -- which jointly control 45 percent of EADS -- plan to prevent any investor considered predatory from owning more than 15 percent, the FT said.
Dubai's sovereign wealth fund bought 3.1 percent of EADS last summer and VEB, a state-controlled Russian bank, took a 5 percent stake in December, triggering a debate about the role of state-backed investors at EADS.
The issue arose again when the Franco-German group last week won part of a $35 billion deal to supply the U.S. military with its Airbus tanker aircraft, defeating arch rival Boeing to the chagrin of many U.S. politicians.
A spokesman for French President Nicolas Sarkozy declined to comment on Friday. Sarkozy has vowed to protect French businesses from sovereign wealth funds and private speculators.
Germany is reviewing a law that defends strategic industries to possibly broaden the number of sectors to which it might apply.
The French state has 15 percent, Lagardere 7.5 percent and Daimler 22.5 percent of EADS. A shareholder pact guarantees Franco-German power-sharing but leaves control of most issues with the two industrial shareholders.
The two main options under discussion were awarding golden shares in EADS to Paris and Berlin or adopting poison-pill style defence mechanisms for Dutch-registered EADS, the paper said.
EADS holds its annual meeting on May 26.