Three people were injured when the Norwegian Dream and the cargo ship Ever Decent were in collision 17 miles off the coast of Margate in Kent. A company spokesman said a further 20 passengers received minor medical treatment.

The BBC's Tom Heap: "It's not clear who will carry out the investigation"

The Norwegian Dream managed to sail on to Dover despite a gaping metal gash in the bow of the vessel.

But the 25-strong crew of the container ship Ever Decent remain at sea attempting to fight a fire on board the stricken boat.

The 52,000-tonne cargo ship, is some 15 miles off Margate under a noxious cloud of smoke.

A tug battles to douse the fire on the cargo ship

The majority of the passengers on the Norwegian Dream came from North America.

Arielle Adelman, 16, from Brooklyn, New York said: "We weren't sure if it was going to sink. When I heard the bang I really pictured another Titanic and started running to the deck.

The BBC's Liz Mackean:"Emergency services were waiting at the dock to inspect the appalling damage"

"It was really scary. There was a loud bang. I was walking down the hall and fell over. The ship started shaking and things started falling. No-one got seriously hurt."

John Chambers, from Carlisle, Cumbria said: "We could see in the distance one of the ships that was on fire and other ships were there that were coming to help."

Fighting blaze

Passengers on the Norwegian Dream talk about their ordeal

Helicopters, tugs, lifeboats and the German frigate Augsburg went to offer aid to the Ever Decent shortly after the accident occurred at 0115 BST (0015 GMT).

Rescuers believe the fire on the cargo ship was sparked off as a result of the collision between the two boats.

Rod Johnson, Dover Coastguards' commanding officer, said: "When the tank was breached, water rushed in, forcing the ship to tilt quite sharply to one side."

He said at that stage the Ever Decent's master, Captain Shu, a Taiwanese national, had started taking the boat towards shallow water over a sand bank.

Mr Johnson said the captain was then able to use water ballast to bring the boat back up to a near-upright position.

However, several cargo containers fell into the sea, and others landed on the ruptured bow of the Norwegian Dream.

Pollution watch

Lifeboats were launched from Dover and two other English harbours, Margate and Ramsgate, but have not been needed.

Smoke pours from the side of Ever Decent

Deputy Prime Minister John Prescott told the BBC said the UK had been leading the way in maritime safety in the Channel area.

Asked whether more controls were needed on Channel shipping, he said: "You could always argue for more controls and I'm quite prepared to but let's see what the inquiry tells us about the cause of this incident."

Pollution experts are assessing the damage, including any threat to beaches on the Kent and Essex coasts.

The Deputy Prime Minister John Prescott, talking to BBC News

A Marine and Coastguard agency spokesman said: "Several of the containers which are on fire contain paint and paint hardener which is producing noxious smoke.

"However the vessel is 15 miles off shore and is not posing a threat to the shore line."

Pete Coombs, Kent Fire Brigade deputy chief officer, said that it could take at least 24 hours before the blaze was brought fully under control.

Three salvage tug boats are spraying water onto the container ship to try and damp down the flames.

Collision mystery

It remains unclear how the accident came to happen in good weather conditions.

Norwegian Dream passengers were relieved to get their feet back on solid ground

Mr Johnson said: "There was absolutely no sign of trouble before the collision. No radio messages were taken from either ship."

The Bahamian-registered Norwegian Dream was on a 13-day cruise of the Scandinavian capitals which also included Germany and Russia.

The Ever Decent, built in 1997, is registered in Taiwan and is owned by the Evergreen Marine Corporation.

Passengers arriving for a cruise on the Norwegian Dream scheduled to start on Tuesday were told the sailing was cancelled.

They will be accommodated on board the boat before being sent home on Wednesday with a refund.

• Terrified passengers feared second Titanic
• Picture gallery: Channel collision
• Q&A: Investigating the collision
• Ship fires create unique dangers
• Keeping Channel traffic in check
• Norwegian Dream: Luxury afloat