Rules, page 8:
The battle between armies is conducted in the same way as the battle between fleets
Rules, page 7:
The Government of the invading fleet may choose, if need be, which of the fleets in the region it wants to match
So the guy moving in decides who to attack.
If he for some reason doesn't want to attack then the defenders may attack instead:
If fleets already in the sea region wants a battle, it has to be declared directly after the other fleets have moved in
If there are fleets from several nations existing peacefully among each other, those players must decide between themselves who is going to sacrifice himself in the battle. If they cannot decide they obviously won't attack and all fleets will live in peace in that region.
So: the active player makes the first decision of who who to attack or not. Only if he declines to attack may the defender(s) retaliate.