Microsoft 365 Copilot Retrieval API does not return documents protected with encrypted sensitivity labels (user-defined permissions)

Problem

The Retrieval API returns HTTP 200 with empty retrievalHits for all documents that have sensitivity labels with encryption and user-defined permissions applied, regardless of the calling user's rights on the label.

Direct Retrieval API call via Graph Explorer, authenticated as licensed user:

POST https://graph.microsoft.com/beta/copilot/retrieval
{
  "queryString": "Schadenbearbeitung Kfz",
  "dataSource": "sharePoint"
}

Response: HTTP 200
{ "retrievalHits": [] }

Environment

• Licenses: Microsoft 365 E5 + Microsoft 365 Copilot (assigned to calling user)
• Copilot Retrieval API pay-as-you-go billing: active for all users
• Microsoft Foundry SharePoint grounding tool (sharepoint_grounding_preview) configured per agent
• All permissions correctly configured: Files.Read.All, Sites.Read.All, Sites.Selected (application, admin consented on Foundry project managed identity)
• Same Entra tenant for Foundry and SharePoint
• At least VIEW and EXTRACT usage rights are assigned to the groups that are assigned to the encrypted labels and the calling user is in those groups.

Key findings from investigation

1. Unencrypted documents work: A document without a sensitivity label was successfully indexed and returned by the Retrieval API. As soon as a sensitivity label with encryption and user-defined group permissions was applied, it disappeared from results immediately.
2. Native M365 Copilot works fine. The same encrypted documents are successfully retrieved, summarised, and referenced by native Microsoft 365 Copilot chat. The sensitivity label is correctly displayed in responses.
3. Graph Search API works fine. POST /v1.0/search/query returns the same documents correctly, confirming they are indexed in Microsoft Search and accessible to the calling user.
4. Foundry SharePoint tool behaviour matches: Foundry SharePoint grounding tool returns {"documents": []} for the same documents, consistent with the Retrieval API behaviour. Application Insights confirms the tool call completes with a real duration (~2700ms) and returns empty results — not a timeout or auth failure.

Questions

1. Is the Retrieval API's semantic index unable to index AIP-encrypted documents with user-defined permissions as a background crawl service, regardless of the calling user's rights? If so, is this a known preview limitation or a permanent architectural constraint?
2. Native M365 Copilot successfully retrieves and summarises these same encrypted documents. What is different about the Retrieval API's decryption path that causes this gap?
3. Is there any supported sensitivity label encryption configuration that the Retrieval API CAN index and return?
4. Is encrypted document support via user-defined sensitivity label permissions on the roadmap for the Retrieval API, and if so is there a planned timeline?