Under FARs, a "Safety Pilot" can log time as P1. This is only applicable if the captain is wearing foggles and flying on instruments in VMC - if that's the case, both he and the person sitting next to him can log the time, and count it towards any hours that the FAA may require.
I think that under FARs both can log P1 irrespective of the weather or whether the other pilot is wearing foggles and whether its a multicrew aircraft. To do this, both pilots must have a role to play in operation of the aircraft, agreed before the flight. An example would be that one flies the other does the radios.
As stated above, these hours would not count towards a JAR qualification.
I'm sure this has been covered before.