Bug with colonization?

If you have a treaty with another race, you can only colonise in their systems if you the non-aggression clause is set to allow colonisation in each others' systems.

It fooled me too. Could have perhaps worded things a little better, eh?

Having a colony in another race's system tends to make them unhappy.
So, by non-agression, maybe it also means to be like a sort of 'not annoying or offending the other race' treaty, since it is apparently possible that, if having a colony in their system makes them unhappy, they will soon get unhappy enough to want go to war with you, and so the non-agression pact has to compensate for it by restricting such things, since the AI races will get annoyed at you even if you are at peace with them...
It's an idea, anyways.

I should know, I was on good terms with a race, they came in and colonized a planet in a system I had already colonized (it was previously empty, but they were quite a few systems away, so I had colonies there about 10 turns before them), and now they are liking me less and less because we have colonies in the same system, even though it was my system first.

Either that, or the AI slipped in a 'don't colonize our systems' clause in the non-aggression pact... the AI seems good at doing that... slipping in little things that hit you hard or confuse you if you miss the fine print, as it were.

AI contracts are largely random. they often have things in them that make no sense at all.

I've also seen the AI send a colony ship to a world in my system and just park there. Its as if they are in denial over not being able to colonize due to a treaty.