Tobacco stocks drag Britain's FTSE to three-week lows

* FTSE 100 index falls 0.5 pct

* Canadian ruling hits BAT

* Greece keeps market on edge

By Liisa Tuhkanen

LONDON, June 2 (Reuters) - Britain's top share index touched its lowest in more than three weeks on Tuesday, kept under pressure by a drop in tobacco stocks following a Canadian court ruling and lingering uncertainty about a Greek debt deal.

British American Tobacco (LSE: BATS.L - news) fell 2.2 percent, the biggest declining FTSE 100 stock, after a Canadian court awarded more than C$15 billion ($12 billion) in damages to smokers in class action cases. A BAT subsidiary was among three companies that said they would appeal.

"The wider implications of the legal battle are more significant than the billions of dollars in damages awarded to the plaintiffs in this particular instance," Laith Khalaf, senior analyst at Hargreaves Lansdown (LSE: HL.L - news) , said.

"If this genie gets out of the bottle, it will set a precedent for court cases across the globe against the tobacco industry. The tobacco firms involved are therefore likely to throw the kitchen sink at defending their case."

Peer Imperial Tobacco dropped 1.6 percent, pushing the blue-chip FTSE 100 0.5 percent lower to 6,917.84 points by 1022 GMT after falling 0.4 percent on Monday. The index is up about 5 percent this year, but has traded in a tight 350-point range since the beginning of February.

Traders noted persistent uncertainty about the situation in Greece, whose Prime Minister Alexis Tsipras said the country had sent creditors a comprehensive and realistic package of reforms for consideration and was calling on Europe's leaders to accept it so a long-awaited deal can be struck.

The heads of Germany, France and Greece's international creditor institutions agreed late on Monday to work with intensity in coming days as they try to clinch a deal in debt negotiations with Athens.

"Europe is still a big unknown. It's keeping the markets on edge, and we're playing a range, because no-one wants to commit their money long-term when no one knows what the outcome over Greece is," ETX Capital sales trader, Mark Priest, said.

The concern is that Greek debt default and exit from the euro would raise fresh uncertainties about the euro zone as a whole and damage Europe's growth prospects.

On the upside, plumbing supplies group Wolseley (LSE: WOS.L - news) was the biggest gainer, rising 2.3 percent after posting a 12.4 percent rise in quarterly revenue.

"We are pleased to see the continuation of strong revenue growth in like-for-like trends," Guardian Stockbrokers' director of trading Atif Latif said. "Overall we ... remain bullish on the outlook given the margins trend continuing to remain resilient." (Additional reporting by Atul Prakash; Editing by Louise Ireland (Other OTC: IRLD - news) and David Holmes)