This seems like an easily arbitrated dispute. But I'm not privy to all the details and IANAL.

Arbitration only works if both parties are at least somewhat co-operative with the process. If someone decides to just not co-operate with the process or actively impede it, you need to escalate far beyond arbitration, which gets very expensive very quickly (with maybe some small chance that if you can pay for it, you might be able to get some of it back at the end. The belligerent side is generally just betting you'll run out of funds and willpower before you get there).

The problem with the legal system in cases like this is if you have the police in your pocket, you can manipulate the perception of the truth and feel confident in bullying your adversary.