The FTO or RTF must list on their application all the FI(R)s that are used and also list which FI's are responsible for supervision of the FI(R)s.
When it comes time to remove the restriction, it is the supervising FI who will make the recomendation.
JAR-FCL does not specify the level of supervision. Which continues the system that was in effect outside of the UK for years.
A point worth remembering is that the UK has had a system where most instructors were FIs and only a few inexperienced ones were AFIs while they gained some experience.
However, in other countries the practice was that the CFI and Deputy would hold FI qualifications while all other instructors within the organisation would be AFIs regardless of experience. Thus it would not be reasonable for a CFI to be present at the airfield for possibly 10 to 12 hours per day, 7 days per week, 52 weeks per year. That is not to say that they would not be aware of what is happening.
I think that a good definition of supervision is what the CAA does in the UK.......there is not a CAA official present at every take-off and landing but they know what is happening overall and thus regulate a very safe industry.
Regards,
DFC