Arbitration can be a good way to get such disputes resolved, but only if both parties agree on the impartiality & wisdom of the arbitrator!
If you want to go down that route, I would check with your friend that they are happy to use arbitration. But before doing so have some good suggestions in your mind as to who might make a reasonble arbitrator from your friend's point of view.
I would avoid using anyone who needs to maintain a relationship with either party, just in case...
good luck
tp