Hari... I don't know International law... I am also not sure about internet use.. and the law.
But I can tell you this.. if it is an US artist you are covering.. and they belong to BMI, ASCAP etc. then you absolutly have to pay up front. There is this thing about public domain.. but you would want to reseach it.
Harry Fox is the main link for US based music.
http://www.nmpa.org/hfa/hfafaq.html
Here is the fax link.
Our band did a cover of a Beatle song (Harrison actually) we had to pay $42 per 500 copies (this included downloads) no one ever gave us much information about streams?? So we offered it as streams.
Saying all this... you will find... Very few OMD's will allow you to put up a cover tune. They don't want the hassle.
MP3.com.. was the only one I ever knew who allowed this, and they run you through the wringer.. making sure you had all the license etc.
I hope this is helpful.. I agree with Alistair... record your own music.
If you want to get feedback from cover tunes.. the best way is to run it by your local network of friends.. and leave the virtual world out of it. It may come back to haunt you one day.
Blessings
Ricky