'May sadly embraces retreat.' Pardon? (7)
I believe the answer is:
amnesty
'pardon?' is the definition.
(amnestying is a kind of pardoning)
'may sadly embraces retreat ' is the subsidiary indication.
'sadly' is an anagram indicator.
'embraces' indicates putting letters inside.
'retreat ' becomes 'nest' (nest is a kind of retreat ).
'may' is an anagram of 'amy'.
'amy' going around 'nest' is 'amnesty'.
(Other definitions for amnesty that I've seen before include "A general pardon for nasty me" , "General pardon, usually political" , "Dispensation" , "International organisation concerned with human rights" , "A general pardon as for rebels (7)" .)