Yes. I had an army in Madrid (Spain). Another smaller army in Navarre. My Madrid army was attacked from Ashurias. It lost, and instead of retreating back towards France, or going to where another force was located, it retreated to Western Spain.
But, even if I had not had an army in Navarre, I would think the default should always be back toward France. So, to my way of thinking, the priority should be:
1. If attacking, back to the province it left.
2. Toward France and if choices, to an area with friendly forces; or
3. Towards France, or if not possible:
4. Away from France, to an adjacent force; or
5. Finally, to any space available if none of the above work.