Actually, I saw a thread somewhere that suggested a good use for Privateers. I keep forgeting to try it out to see if it works.
It went something like this.
The AI seems to like going for Privateers without any provocation, which makes sense really.
But if you stack a couple of Frigates on the same tile, it's the Frigate that gets attacked. Thanks to the Privateer, there's no war decleration.
So if you want to cut down a friendly AI's navy mid game, without going to war, they provide a way.