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1. For vessels carrying out mainland cabotage and for cruise liners, all matters relating to manning shall be the responsibility of the State in which the vessel is registered (flag state), except for ships smaller than 650 gt, where host State conditions may be applied.

2. For vessels carrying out island cabotage, all matters relating to manning shall be the responsibility of the State in which the vessel is performing a maritime transport service (host State).

3. However, from 1 January 1999, for cargo vessels over 650 gt carrying out island cabotage, when the voyage concerned follows or precedes a voyage to or from another State, all matters relating to manning shall be the responsibility of the State in which the vessel is registered (flag State).

4. The Commission shall make an in-depth examination of the economic and social impact of the liberalization of island cabotage and shall submit a report to the Council before 1 January 1997 at the latest.

On the basis of this report, the Commission shall submit a proposal to the Council which may include adjustments to the manning nationality provisions laid down in paragraphs 2 and 3 so that the definitive system shall be approved by the Council in due time and before 1 January 1999.