Up until VERY recently, it was not proper for a soldier or veteran to salute out of uniform. Within the last few years, however, it has become proper to salute THE US FLAG out of uniform for either an active duty soldier or veteran. ONLY the flag, not another member.

Had the gentlemen you mentioned been in uniform even though of different countries, it would have been totally proper military etiquette for the person lower in rank to salute an officer of a higher rank. It is not proper to salute an enlisted man, only officers. The lower rank holds the salute until it is returned by the ranking officer.

I'm sure that the details of these traditions very from country to country.

All this said, it is possible that the military courtesy I learned over 40 years ago is different today.