Part 1: If the Loser uses it's power on the offense, "both players play attack cards, if possible ." If the defender doesn't have any attack cards, can he then play a negotiate card? If so, then the way I read the power, the Loser would be the "winner" (attack card versus negotiate) and thus end up being the "loser." Is this correct?

Part 2: In the above situation, would the Loser collect compensation just as if it had played the negotiation card?

Thanks in advance.

If the defender doesn’t have any attack cards he can play a negotiate card (the same for the offense). If Loser used his power, declaring an upset, the loser wins and the winner loses. In your example, if the defender played a negotiate card and the offense an attack card, the defense wins.

Yes, the Loser can collect compensation.

Awesome. That's how we played it when the situation came up earlier this evening. I just got this game for Christmas and though it was pretty straightforward but with all the races, flare cards, artifacts, tech, etc., there's really alot going on.

Hold on a bit. Did you ask if Loser, having played an attack card, collects compensation if he loses because his opponent played an N during an upset (having no choice)? (It seems that's what you asked for part 2.)

If so, that's not right. You only get compensation if you both play an N and lose. The only way someone can get compensation in an upset is for the guy who played the N to be Pacifist (wins with N, but upset makes him lose, and having N'd and lost, he gets compensation).

Just to be clear, you have to play a negotiate and lose with it (and lose ships) to collect compensation. Toomai has it right, but the wording of "you both have to play a negotiate and lose" can mislead some into thinking both players have to do this. If both players play negotiates and fail to deal, neither collects compensation, but it does count as a loss for both players.

Thank you for your correction Toomai.

I wasn’t addressing the second part of your question correctly. In your example, if Loser (offense) declared an upset and played and attack card, while the defense played a negotiate card. The defense wins, consequently the defense doesn’t lose ships and therefore there is no right to compensation.

Deleted -- I wasn't thinking.

Should you not show your hand and draw a new hand because you dont have an attack card, the Loser sheet says that you have to play attack cards. thus negotiate cards because it is illegal to play. That means if your the loser and you dont have an attack card you can auto win an auto if your opponent does and you dont (you have an negotiate card only).

Can someone please confirm if this is right?

Yes, it's totally legal to declare an upset if all your encounter cards are negotiates. The Loser power says "both main players must play attack cards, if possible "; if it's not possible to play an attack, then you play one of your negotiates and win. Unless your opponent also has only negotiates, in which case you must deal.

The references below are for Loser vs opponent.

Attack vs Attack: lower total wins
Attack vs Negotiate: Opponent wins but gets no compensation
Negotiate vs Attack: Loser wins but gets no compensation
Negotiate vs Negotiate – make a deal or both lose 3 ships

You only get compensation if you played a Negotiate. Since in any case, the player who played a Negotiate loses no ships to the warp, no compensation is collected. The actual loser can't collect compensation because he didn't play a Negotiate.