If you used a credit not a debit card (Which you always should online) you can simply charge back the amount on the grounds the goods were not delivered, its that simple, I do it regularly, you are not contractually bound to use arbitration.
According to Elance's ToS, it sounds like he IS bound to use arbitration in this case.
As a merchant, I have a serious issue with anyone who issues a credit card chargeback simply to circumvent the ToS that they agreed to when making a purchase. In this case, since the OP is not agreeing to arbitration (which is part of the ToS), I'm not sure that he would win the chargeback. And most likely, Elance would deduct the chargeback fees from any refund issued.