I’ve gone back to peruse my books that deal with the Falklands, and out of them (including Halpern’s The Great War at Sea) only one of them seems to deal with the flares specifically: Castles of Steel by Robert K. Massie. Massie states that:

At 8:12 p.m., Liepzig, listing and seeming about to capsize, fired two green distress lights. Luce took this as a signal of surrender.

Massie’s wording is that these were not seen as a standard form of communication between enemy ships, rather, it was an act of desperation on the part of the Liepzig to stop the firing. As noted, the act of striking the colors was a recognized symbol between enemy warships of surrender (that is, taking down a ship’s war ensign). Another way that enemy ships could communicate was with the firing of warning shots. This was particularly important during the submarine war as, in order to induce an enemy merchant vessel to stop, submarine commanders could and would fire a shot near the merchant vessel. This happened in any theatre with submarine warfare – the British did it in the Sea of Marmara, the Germans in the North Sea, and so on. This was another recognized symbol. Communication between enemy ships that were openly enemy otherwise not a common occurrence (if indeed it ever happened).

Signal interception, on the other hand, was a key part of the Allied strategy at sea. Whether during an engagement such as Jutland, or when planning anti-submarine actions, intercepted German communications formed a key part of how the Royal Navy responded to threats. German submarines were expected to report regularly, which was about once a day. These signals would be used to create a picture of the location of German submarines, and where they would likely try to go next. With that, the British Admiralty would create “patrol billets” for Allied submarines in the North Sea. American and British submarines would patrol along that line for a set time frame (In the American service, it was an 8 day patrol) before returning to port.

What about vessels that were supposed to be friendly, but in the moment were subject to friendly fire? This was the fate of many Allied submarines during the war. Surface captains couldn’t take the risk that a submarine was friendly until they had confirmation, so they often adopted a shoot first, ask questions later policy. Allied submarines were fired at with guns, rammed, and depth charged. In order to survive, these submarines needed to communicate with vessels that considered them to be an enemy. They had a number of methods of doing so. One of the first was the usage of signal flags and signal lamps. These would be used in a call and response manner where there was a recognition signal and its reply. These would be updated frequently, and many times American submarines were at sea when the new signals were handed out to vessels. Thus, when they attempted to signal with the older code, they would be taken as a threat. One such case was the U.S.S. N-5, which was fired upon by the steamer H.M.T. Ulua. The signals they flew in response to being fired at were likely out of date, as the commanding officer of the USS L-8 wrote in his report on this incident:

The U.S. Recognition signals were made on July 18, 1918; the signals being made by Semaphore at the same time displaying prominently the U.S. Ensign. The allied recognition signals were not at that time supplied, having been received since that date.

In addition to the flags and lamps, American submarines had a rifle on board which was used to fire smoke grenades as a signal, as well as a flare gun. In some cases, the rifle was a British S.M.L.E.! The American flag was another part of this signaling process, as it was hoped that the friendly vessels firing upon an American submarine would notice the flag and stop (in the case of the Ulua, it did not stop them). Another method that American submariners used to try and signal an, at the moment, hostile vessel was whistles although these only worked once in close quarters. In the case of the O-6 or N-3 this was practical as the friendly vessels were within close distance – the transport firing on the N-3 was only 50 yards away so the N-3’s captain started shouting that they were American and not to fire any more. The O-6’s captain began signaling to a friendly destroyer with a whistle!

So safe to say there were a few recognized symbols between enemy vessels to stop combat or to prevent a chase. There were also many ways that, in friendly fire incidents, vessels attempted to signal to each other to cease firing.