When do you quit being the referee and let the kids "fight it out"?
There are sometimes when an argument is a natural consequence of a bad behavior. Let them try. Listen. See how they do. If someone could get hurt, you will have to step in. After, tell them where they communicated well and what they should have said or done differently. Then have them practice the correct communication. I also remind them of our family mission statement, and vision for 20 years from now.
When children fight, it is a perfect time to teach them about what I call "appropriate sibling relations". There are certain ways that siblings should respect, touch and treat each other. Part of "appropriate sibling relations" is accepting No answers from siblings, and learning how to disagree appropriately with them too.