I know nothing of this, but found the following in CAMBRIDGE NAVAL AND MILITARY SERIES BRITISH FLAGS on Project Guttenburg.
https://www.gutenberg.org/files/46370/4 ... Chapter_Vb
The "private man-of-war" or "privateer" was a vessel the owner (or owners) of which had received from the Crown, or from the Lord High Admiral, "Letters of Marque and Reprisal." The occasion for the issue of such a licence, which was originally granted in the form of Letters Patent—whence the name—might be either special or general. It might be issued "specially" to some merchant who was able to prove that he had suffered certain losses from the action of the subjects of some foreign power, and who was thereupon authorised to make seizure of any ships or goods belonging to subjects of that State until he had by that means taken sufficient plunder to make good the losses formerly sustained by him, but no more. Such licences were also issued "generally" upon the outbreak of hostilities with a foreign state, to any subjects who wished to make war upon enemy vessels on the chance of making some profit by it, and who were able to give satisfactory security that they would comply with the regulations laid down for their conduct, particularly in the matter of the disposal of prizes taken. During the wars of the late seventeenth and eighteenth centuries merchants frequently sought Letters of Marque for their vessels, not because they wished them to take the offensive as regular privateers, but because they were thereby freed of all danger of being classed as "pirates" should they attempt to turn the tables upon any enemy that attacked them. For this reason many, perhaps most, of the ships of the East India and Guinea Companies fitted out in the seventeenth century carried Letters of Marque and displayed the Union jack.
Indeed, despite the issue of the Proclamations of 1634 and 1674, it seems that all privateers in the seventeenth century were in the habit of wearing the Union jack—sometimes with the permission of the authorities, but more often without it—with the object of making themselves look (so far as flags were concerned) as much like the king's ships as possible. The instructions for privateers issued toward the end of that century indicate that there was some infirmity of purpose on the part of the authorities in enforcing the existing law as regards the wearing of the Union jack. Thus the Instructions for privateers operating against Algiers, issued in December, 1681, provided
That the merchants, captains, and others who shall have such letters of marque or commissions as aforesaid shall not weare in their said ships our Union flagg or jack (which is intended to distinguish our owne ships of warr from all others) at no time nor upon no pretence whatsoever, unless they be warranted for so doing by an order of leave under our hands and seal of our lord high Admirall or Commissioners of the Admiralty, whereas the Instructions for Privateers fitted out against France issued in May, 1693, merely ordered that the Union jack or pendant (which actually were illegal without special warrant) should not be worn in presence of H.M. ships or in circumstances in which they might give occasion to a salute by a friendly foreign power.
That such merchants, commanders of ships, and others, who shall obtain such letters of marque or commissions as aforesaid shall not wear our colours, commonly called the Union Jack or pendant on board such ship or vessell by them fitted out in pursuance of such our commission, in company of any our men of warr, or so near any other men of warr belonging to any nation in amity with us, so as to occasion any salute from them, or in or near any port or road whatsoever.
A special distinguishing flag for privateers was first provided in the Royal Proclamation issued in July, 1694, which ordained that vessels receiving "Commissions of Letters of Mart or Reprisals" should wear, in addition to the St George's flag at the masthead and the red ensign with canton of St George at the stern, "a Red Jack with the Union Jack described in a Canton of the upper corner thereof next the staff"—the flag that Pepys in 1687 called the Budgee jack—which was in fact of the same design as the red ensign adopted in 1707, though apparently the canton occupied a larger proportion of the area of the flag in the jack than in the ensign.
Despite this precise direction, the privateer Instructions issued against France and Spain in December, 1704, contain the same instructions as those of 1693 quoted above, which presuppose that these vessels would fly the Union jack and pendant, which the Proclamation of 1694 had forbidden—but indeed, this muddle-headed attitude is not uncommon in official instructions. It is clear that privateers did carry pendants, for Woodes Rogers relates that he was ordered to strike his pendant by the 'Arundel' in August, 1708, "which we immediately did, all private commissioned ships being obliged by their Instructions to pay that respect to all her Majesty's ships and fortifications." The Distinction Jack of 1694 (subject to the necessary modification of the Union in 1801) remained the distinguishing flag of a privateer until privateering was abolished in 1856