AI ship upgrading

In the last two games the AI would often just blatantly go and upgrade it's ships in MY territory while AT WAR with me. Come on, I'm playong on Bright. That's just cheesy. I see a strong Drengin fleet move near one of my fringe planets, it could cause some havoc and then!... The Drengin decide to upgrade the entire fleet just like that... And my weaker fleet would make easy work of them then.

Possible solution? Perhaps allow the AI to make upgrades only at a certain (short) range from one of their planets?
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Play at intelligent, then come back and report if it does that too.

I suspect it might, but you need to play at least intelligent level, before people will take your complains about AI seriously.