What is regarded as moral/legal in this sort of stuff is pretty hazy and essentially driven by technology, politics and others factors. Technology made possible to build practical submarines in the years following the beginning of the 20th century but hard physical limits dictated that in order to operate efficiently they had to fight in a new different way from surface ships, a way that was indeed deemed by many inhumane/cowardly by the standards of the time, though often this was more born out of expediency than heartfelt morality.
Note that there were several attempts to build submarine cruisers that could fight conventionally on the surface, but hard physical limitations made impossible to combine the necessary elements of a surface ships, such as a sufficient artillery armament, a modicum of armor and stability to support them, with an acceptable underwater performance. Amenities such as quarters for prisoners were included in some WW1 german long range designs, but extra space on a submarine is a very pricey luxury from a design trade offs point of view.
So the net result was that for all the disparaging of the "huns" and such submarines eventually ended up being used generally in the way it was most suited to their limitations and advantages, the US in WW2 being notable example, with its prewar fleet boats being ordered to engage in unrestricted warfare from day one.
With the stakes sufficiently high legal niceties and moral qualms are thrown out of the window and weapons capabilities are exploited to the fullest.
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