Very tricky - it's really unclear who's role it should be to do the disciplining in that scenario!
That's happened to my DD before. I also hate confrontation, but I do step in to talk to the other child if the other parent is not watching. I think it's important for my DD to know that I will always stand up for her even when I am nervous or embarrassed. I also try to teach my DD that sometimes we're scared and we do things anyway, so I guess I have to set an example even though I hate doing it!