The Corporation of London, the City's local authority, will introduce a Private Bill in Parliament within the next few weeks, seeking to change the law to let foreign companies vote in its elections.
John Prescott, the Deputy Prime Minister, supports the change and the measure will be given a fair wind by the Government, so it is almost certain to become law.
The move has infuriated the Conservatives, who plan to refer the matter to Lord Neill, the Commissioner on Standards in Public life. "It is extraordinary when the Neill Committee has ruled out foreign donations to political parties that the Government wants to allow foreign companies to vote in British elections," a spokesman said.
Although partners in small firms, such as newsagents, already have a vote in City elections, the decision to extend the principle to large multinationals is far more controversial
There are 50,000 businesses in the City and the 5,500 residents fear they are being sidelined. A survey found 65 per cent opposed giving firms a vote in the election of all councillors.
Under the Corporation's plans, every business with a base in the City will be eligible to vote in elections of councilmen to the ruling Court of Common Council. Although a British or EU national would physically have to cast the vote, they would be acting on the instructions of their directors rather than as an individual.
The Corporation argues that any organisation which has property in the Square Mile should be involved in determining how it is run. It believes that this will encourage companies to invest in London, rather than Frankfurt or Paris.
Michael Cassidy, former head of the Corporation's policy committee, said: "Foreign companies are paying tax and it is a democratic principle that the people paying the tax should have a say in how it is spent."
Mr Prescott and Nick Raynsford, minister for London, are also convinced that the plan will generate investment in Britain.
Critics say the change will undermine the principle that the right to vote is accorded to people rather than property. It could also lead to moves by other local authorities to let foreign companies vote, to encourage investment from abroad.