Under existing U.S. law, only the "owner" of an aircraft may register the aircraft and only citizens of the U.S. are eligible to register aircraft with the FAA. Under both international law and U.S. law, the FAA is tasked with numerous responsibilities including overseeing the safety of operations of its aircraft, which requires the exchange of information with the state of registration of the operator if the aircraft is being operated outside of the U.S. With respect to aircraft that are owned by U.S. citizen trustees that have non-U.S. trustors or beneficiaries, if the aircraft is operated in the U.S., then generally, the FAA has not encountered problems. However, if the aircraft is operated outside of the U.S., the FAA has experienced problems in obtaining important operational and maintenance information concerning such aircraft from the trusts (i.e., the registered owners).

In order to address their concerns, the FAA has proposed that the following issues should be addressed with any trust agreement used to form a trust to be used to own a U.S. registered aircraft. Each such trust agreement must include an undertaking by the trustor to respond to inquiries from the trustee so that:

(A) within two (2) business days a trustee will be able to provide to the FAA the following information: (i) the identity of the person normally operating, or managing the operations of, the aircraft; (ii) where that person currently resides or has its principal place of business; (iii) the location of maintenance and other aircraft records; and (iv) where the aircraft is normally based and operated;
 

(B) within five (5) business days, the trustee, as registered owner of the aircraft, will be able to respond to FAA requests for more detailed information about the aircraft and its operations including the following: (i) information about the operator, crew, and aircraft operations on specific dates, (ii) maintenance and other aircraft records, and (iii) the current airworthiness status of the aircraft; and
 

(C) in the event of an emergency, the trustee will be able to respond to such inquiries more quickly than these timelines specified above.

In addition, the FAA expressed concern regarding various trusts that have separate operating agreements or side letters, which contain different terms from the terms of the trust agreement on file with the FAA. Therefore, the FAA is proposing to now require that these documents be submitted along with the trust agreement and if no such agreement exists, the trustor must provide adequate assurance, which may be in the form of an affidavit, that no such operating agreement or side letter exists. The FAA will not accept silence by the trustee on this issue but will require some form of assurance.

Finally, with respect to non-citizen trusts, the FAA is also concerned that these trusts do not adequately limit the ability of non-U.S. citizens to remove a trustee. Therefore, the FAA will now require that a trust agreement must contain a description of the causes that would justify removal of a trustee. Simply including language in a trust agreement that allows a non-U.S. trustor to remove a trustee "for cause" without clearly defining what "cause" is will not be sufficient. However, the Notice makes it clear that these limits on removal of a trustee do not restrict the right of the trustor to terminate the trust, for example, in connection with the sale of its aircraft.

Over the course of time a standard non-citizen trust agreement has developed that is used by most trusts involving non-citizen trustors or beneficiaries. The FAA has made its suggested changes to that document. The revised standard trust agreement showing the FAA's additions and deletions is available on the FAA's website. The FAA has also requested that all written public comments regarding the FAA's proposed policy be submitted by March 31, 2012 via email toladena.peden@faa.gov.

While the Notice does not specifically address how this proposed policy will affect existing trusts involving non-citizen trustors or beneficiaries, the recent adoption (effective on October 1, 2010) by the FAA of a rule requiring re-registration and renewal of aircraft registration every three years will require such trusts, when re-registering and renewing their aircraft's registration, to address the issues raised by this Notice (and the eventual rules that will be adopted by the FAA with respect to this Notice).