From: The advanced learner's dictionary of current English / by A.S. Hornby, E.V. Gatenby, H. Wakefield. - 2nd ed., 14th imp. - London : Oxford University Press, 1970
The original function of a letter of marque (or Letter of Reprisal) was to right a private wrong. For example, when a Dutch merchant has his goods stolen in Germany, and he cannot gain satisfaction for his loss through legal or diplomatic means, he can be granted a Letter of Marque by the Dutch government. Such a letter allows him to "capture" a German merchant to compensate him for his loss. Since the early 18th century it was no longer in use as a means to right a private wrong. The function of the letter of Marque had changed. These letters were now used by governments, as an instrument of State, to augment the National Navy. This gave the state a naval force which could attack the commerce of the enemy at no cost to public funds. The ships captured had to be brought before an Admiralty Court and tried to ensure they were a legal prize, and not the property of a neutral state.
The privateers acted on a commission recognised under the Law of Nations. One of the principle clauses of a letter of marque is that of specifically naming the country whose vessels can be legally captured. There were heavy penalties if the property of other nations was violated.
Letters of Marque did not completely safeguard a privateer from prosecution even when ships of certain countries were excluded from attacks. When a privateer is captured by hostile nations he is often charged with being a pirate and swiftly executed. Also when countries make peace between them and a privateer fails to get the news about this in time he can be prosecuted if he continues to attack ships of the now friendly nation. Sometimes a privateer is such a long time away from home or the colonies that he only hears the news of a peace treaty when he returns home from his privateering enterprise.
The use of Letters of Marque was discontinued by many countries who signed the Declaration of Paris in 1856. The United States as well as several other countries signed the International Treaty much later. The US was at that time much more dependent on their use to increase their Maritime power because they lacked a Large Navy.