The DEA is a controversial law that was passed in 2010. It contains provisions for combating the online infringement of copyright, which the Lib Dem's Working Group on Information Technology said should be repealed.
"We recommend the repeal of sections 3-18 of the Digital Economy Act, which relate to copyright infringement," the Working Group's policy proposal (21-page / 131KB PDF) said.
"Good legislation is built upon a robust evidential framework and a clear democratic mandate, neither of which were secured in this case. The ultimate result has been a deeply flawed and unworkable Act which stands only as the main emblem of a misguided, outdated and negative approach," the proposal said.
The DEA sets out that Ofcom, the UK's communications regulator, should draw up new regulations to detail how internet service providers (ISPs) should be involved in attempts to stop copyright infringement.
In a draft code of practice published in May last year, Ofcom said that internet users should receive three warning letters from their ISP if they are suspected of copyright infringements online.
Details of illegal file-sharers that receive more than three letters in a year would be added to a blacklist, the draft code said. Copyright holders would have access to the list to enable them to identify infringers, it said.
Under the draft code, ISPs could also have to suspend users' internet access if they are found to be illegally downloading copyrighted material. The finalised Code is expected to be published shortly.
Sections 17 and 18 of the DEA also allow the Culture Secretary to draw up new regulations that would see courts decide whether to force ISPs to block access to pirated copyright works. The Government recently announced that it had no plans to bring any new regulations under sections 17 and 18 into law "at this time".
If the DEA's copyright laws are not entirely repealed the Working Group said another option would be to revoke sections 17 and 18 and conduct a "fundamental re-think about the desirability and practicality of site blocking". The Government should also not ratify Ofcom's code on ISPs involvement in tackling online piracy until it "can demonstrate that the measures would be necessary and effective, and assent had been given through a vote of both Houses," the Working Group policy document said.
The Working Group said more "balanced legislation and support" was needed and that the UK had to "break away from the negative assumptions that winning a complete victory against piracy is possible, or that it is the silver bullet that will safeguard UK creative industries for the coming years".
The Working Group's proposals will be voted on at the Liberal Democrat conference in September.