Movement really doesn’t need to play a part in retreats. The movement is just a game mechanic. In 6 months time an army could move a lot more than they do in the game and ships could be halfway around the world.

Retreat should always be an option. The AI always knows where you are and can see things you can not. You should not loose fleets and armies to technicalities. It is not Law, it’s a Game!

That makes it an AI Exploit.