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If a nation which has good relations to the Pope completes five(?) colonies in the same Colonial Region the Pope grants this whole Colonial Region to this nation which has the following effects:
- A bonus to settler growth for the "owner" of the Region and(????) his Colonial Nation (not sure about this one)
- A malus to settler growth for all other Catholic(!!) nations.
- Catholic AI countries are much less likely to colonize in a Region which is already "owned" by another country.
So it affects only Catholics, other Christian religions and non Christians can and will colonize in "owned" Regions without any mali.
If this is not in the Base Game it is a feature of (wild random guessing) Conquest of Paradise or El Dorado.
https://eu4.paradoxwikis.com/Colonization#Treaty_of_Tordesillas