Summary

Once after the dispute is raised, arbiter has a good chance of being biased to one party even after off chain settlement. Monetary settlement without on-chain agreement of arbiter's decision by buyer and seller makes the escrow contract inefficient.

Vulnerability Details

As per the design, Arbiter gets all the monetary power once after the dispute is raised, and the final monetary settlement lies on single transaction by the arbiter.

Impact

Arbiter can act biased to either buyer or seller, even after the off-chain settlement among them. Since the monetary decision is completely depend on the call of resolveDispute() by the arbiter, even after the mutual off chain settlement, arbiter can act biased, as there is no effect on arbiter's monetary benefit.
As per the workflow, the dispute is raised only after the report is submitted by the seller to the buyer and the seller has no stake on anything except the token locked in the contract, so the seller might be the most affected.

Tools Used

Manual Review

Recommendations

Multi sign mechanism can be used to confirm the decision of the arbiter by both parties on-chain.