The exact rule you are quoting is JAR-OPS 1.960 (a)(1)(ii), which reads as follows (with emphasis added by me):
(ii) When operating on a multiengine type under Instrument Flight Rules (IFR), the pilot has a minimum of 700 hours total flight time on aeroplanes which includes 400 hours as pilot-in-command (in accordance with [the requirements governing Flight Crew Licenses]) of which 100 hours have been under IFR including 40 hours multi-engine operation
I think that's pretty clear - the hours need to be "under IFR", so can be IFR in VMC. By sole referene to instruments but under VMC would not count.
But, since you asked the question, I thought I'd compare it to a similar quote which I
know is interpreted this way. I compared it to the requirements for becoming an IRI. JAR-FCL 1.395, when describing the requirement for becoming an IRI, uses the same phrase, "under IFR". In this case, we
know that the CAA interpret this to mean literally under IFR, whether IMC or not, because they also give (in LASORS) the alternative of using time by sole reference to instruments, whereby one hour by sole reference to instruments is equivalent to 4 hours IFR. Interestingly, though, as far as I know, there is no similar 4-1 ratio for flight by sole reference to instruments for meeting this JAR-OPS requirement, although I might be wrong on this point.
Hope that answers the question,
FFF
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