Vatican City State or the Holy See is a theocratic country in Southern Europe, ruled by a Pope. Its capital is Vatican (or Vatican City). It is the world's smallest country. Vatican City is an enclave in Rome, near its city centre.
According to the New York Times the Vatican has centuries old structure like "(...) an ancient monarchy in which the pope is treated like a king, branches of the hierarchy are run like medieval fiefs and supplicants vie for access and influence."  Cardinals are addressed as “Your Eminence” and bishops are “Excellencies.” as would happen in a baroque court. Cardinals were traditionally immune from punishment and treated like nobility.  
The "Holy See" and international law
The Holy See is a distinct entity and not synonymous with the tiny Vatican City "state". It comprises the Diocese of Rome, or simply the leadership of the Catholic Church, with the Pope at the top. The distinction between the two bodies is the source of considerable confusion regarding the Vatican's status as a subject of international law: while the Vatican city has a territory and citizens, the traditional attributes of a sovereign state, it is the Holy See which actually maintains international relations and is represented at the UN as a permanent observer with voting rights.
Lawyers seem to disagree whether the Pope would or would not have diplomatic immunity and of course, even the Pope and country rulers should never ever be above the law.
Dawkins and Hitchens believe the Pope (retired pope Benedict XVI) would be unable to claim diplomatic immunity from arrest because, although his tour is categorised as a state visit, he is not the head of a state recognised by the United Nations. 
A Vatican scandal has emerged involving corruption on allocation of contracts.  This must be a disappointment to the faithful who donate to the Church hoping their money will be well used. Also there have been embarrassing leaks from frustrated high ranking churchmen in the Vatican.  The pope's butler who revealed the scandal spent time in prison for telling the world what's wrong. 
[ Carmello Abbate undercover investigator] caught the priests [high ranking Vatican insiders] on hidden camera dirty dancing at private parties and engaging in sex acts with male escorts on church property. He also caught them emerging from dark bedrooms just in time to celebrate mass. In one postcoital scene, a priest parades around seminaked, wearing only his clerical vestments. “This is not about homosexuality,” Abbate told The Daily Beast when he published the exposé. “This is about private vices and public virtues. This is about serious hypocrisy in the Catholic Church.”
Other Newspapers also published this.
[The Irish Times] claims the report details information about sexual meetings organized by members of a gay underground network, who got together in venues across Rome and Vatican City. 
Most people are likely to think the Priest Child Molestation Scandal is far worse.
Vatican's greatest "enemies" include: -relativism -gender theory -same-sex marriage -atheists -literacy (reading the Bible reveals Christianity's nature) -Thomas Jefferson (condemning the exploitative nature of the Roman Catholic Church) -Christopher Hitchens -women equality
- Vatican’s Bureaucracy Tests Even the Infallible
- The recent punishment of Cardinal Keith O'Brien suggests this no longer strictly applies.
- UN: Non-member States and Entities
- Richard Dawkins calls for arrest of Pope Benedict XVI
- THE VATICAN EXPOSED BY THEIR WORST ENEMY
- The Vatican City is a Country
- Liberapedia came across Angelic Man who's supposedly a pastor at the Vatican. 'Angelic' may not be corrupt, he may be sincere in his unreasonable beliefs. What about those who employ someone like him?
- Pope Benedict’s butler arrested in ‘Vatileaks’ scandal
- Leaks and power plays in Vatican City
- Butler Gabriele sentence unlikely to end Pope scandal
- Did a Cross-Dressing Priest Sex Ring Bring Down Benedict XVI?
- Pope Benedict XVI Resigned Partly Because Of Powerful Vatican Gay Lobby, Italian Paper Claims