Queen of arts: Francesca von Habsburg looks back on her extraordinary life

Controversy and provocation, working hard, playing hard, having a full life and being dynamic is what it's all about," declares Francesca von Habsburg, the woman who is not only the biggest cheese of all in the contemporary art world but also the wife of Archduke Karl von Habsburg – who once upon a time would have succeeded to the Austro-Hungarian empire, whose thrones included Austria, Transylvania, Hungary, Bohemia, Slovenia, Dalmatia, Illyria, Galicia and Croatia.

But sitting outside a fashionable restaurant in London's Notting Hill with the lady herself, it becomes apparent that she is a million miles away from what you would expect an archduchess to be like. Uncommonly chic, dressed in jeans, perilously high heels and a green Margiela shirt dress, she is down to earth, enormously loquacious and marvellously "punk rock" – an asset she naturally employs in the administration of her "art foundation", T-BA21 (which stands for Thyssen-Bornemisza Art Contemporary), the most progressive institution of its kind in the world.

Her latest commission, No Night No Day, an abstract opera by the cutting-edge Welsh artist Cerith Wyn Evans and the German composer Florian Hecker, due to be unveiled next month as part of the forthcoming 53rd Venice Art Biennale, is entirely indicative of her ethic. "It is an opera, but it is not," she maintains. "In a sense it is a film and a piece of music but it's completely abstract and in my opinion abstraction is probably the most refined and exciting form of art today. So we're breaking the rules as we go along but that's not the reason we're doing it; breaking the rules is just a by-product if you will. Most rules were set a long time ago and are irrelevant today and have to be broken."

Von Habsburg, who was born Francesca Anne Dolores Freiin Thyssen-Bornemisza de Kászon et Impérfalva, in Lausanne, Switzerland, has always flouted convention. She is the daughter of the billionaire industrialist, the late Baron Hans Heinrich Thyssen-Bornemisza and his third wife, the model Fiona Frances Elaine Campbell-Walter.

The first time I saw her, however, was on a wet Tuesday night in 1979 when she waltzed into London's infamous Blitz Club, the flamboyant hangout of the post-punk elite, and waded through a sea of big shoulder pads, eyeliner and impossibly vertical hairdos on the arm of the New Romantic icon Steve Strange. And while her auburn hair was hoisted up Bette Davis-style and her make-up reminiscent of a Biba model, her long black evening dress was cut to expose a bare breast whose nipple she had highlighted with rouge. Even here, heads turned, brows were raised and elbows nudged – but Francesca herself was entirely unabashed.

Subsequently, while she was modelling in fashion shows and singing backing vocals on the pop hit "Fade To Grey" by Strange's band Visage, she cut a swathe through London nightlife. Her frequent soirées at her Seymour Walk home were legendary. It was not at all unusual to see Michael Douglas being Michael Douglas, Iggy Pop wandering around without his shirt, Grace Jones berating an innocent or a Lord of the Realm passed out in a chair while extravagantly dressed fashion students and poor musicians mingled in the background.

Now recognised as the doyenne of the international contemporary art scene, Francesca initially came to London after a spell at Le Rosey, the prestigious Swiss boarding school, to study at Saint Martin's College of Art. But after two years, she achieved the impossible: she was actually thrown out after berating a visiting lecturer who had curated an exhibition by Carl André (he of the infamous "pile of bricks") at the Tate.

"I got up at the back and started shouting at him: 'You have a responsibility as a curator not to misinform people to this fucking extent,'" she explains, still obviously miffed. "I was completely raging at him."

Passion for the arts runs through the Thyssen dynasty. Her great grandfather August Thyssen of the Ruhr (1842-1926), a Rhineland peasant who turned a chicken-wire business into a vast iron and steel conglomerate, discovered fine art late in life. He collected Dutch masters and famously purchased six marble sculptures for 145,000 francs from Auguste Rodin. Next up was Francesca's grandfather Heinrich (1875-1947), who furthered the family's artistic endeavour by purchasing every work of consequence he could find, including Hans Holbein's portrait of Henry VIII from the Spencer collection. Consequently, when the family's third billionaire Baron "Heini" (1921-2002), Francesca's father, came to rule the roost, he really took the bull by the horns – buying a Vermeer one day and a Jackson Pollock the next in order to amass the world's greatest private art collection, rivalled only by that of the Queen. "But I think the Queen is not perhaps really a collector," he observed.

Francesca von Habsburg, who was born in 1958, has undoubtedly inherited the keen Thyssen eye for spotting artistic talent. Her first exhibition in the mid-Eighties was in conjunction with Robert Fraser – aka "Groovy Bob" – the legendary art dealer famously snapped in handcuffs in the back of a car with Mick Jagger and subsequently depicted in Richard Hamilton's painting, Swingeing London, now in the Tate collection. "That was the time when we brought American artists like Basquiat, Schnabel and Haring to this country, when nobody had heard of them," she recalls nonchalantly. "Robert was a definite innovator but he was also in the commercial world of art, which he despised."

Von Habsburg has collaborated in the past with, among others, the artists Matthew Ritchie, Carsten Holler, Tracey Emin, Jim Lambie and Sarah Lucas. But she too harbours doubts regarding the world of commercial art in which greedy collectors buy art works from greedy galleries and then lock them in a vault in anticipation of financial gain.

"I have an issue with ownership," she says. "I come from a family that has battled each other over its possessions for generations. The first project we did as T-BA21 was the Janet Cardiff Walking Through exhibition. I wanted to buy a work of art by her in 2001 that I saw in New York and when all the galleries refused to sell it to me, I realised that her work is so huge that it is better viewed in a museum than hidden away in a private collection. A lot of artists in that upper bracket reach a point where they want to be seen in museums and public exhibitions so I saw that and started T-BA21 as a foundation that would pursue exhibition programmes and work as a foundation in an institutional way rather than just being an administrator for private collections. I immediately understood that the role I had to play was opposite that of a private collector."

Francesca has almost single-handedly pioneered a very different kind of art institution. The foundation's "Pavilions" (spaces intended to bring art and architecture to the wider audience using the surrounding natural habitat to enhance the viewers' experience) include Your Black Horizons, designed by the architect David Adjaye and artist Olafur Eliasson on the Croatian island of Opud and The Morning Line in Seville by Matthew Ritchie and architects Aranda/Lasch and Arup Advanced Geometry Unit.

"The Pavilion idea is one of the core philosophies of the foundation," she asserts. "It's about these special commissions spreading themselves over a large geographical area. I thought that having these small pavilions all over the world would inspire people to get into contemporary art. The idea is to bring art to remote locations and give the work we do a more global sense. Big cities have it; remote locations do not. For me, combining contemporary art with nature is a big thing."

Another pavilion, The Cybermohalla Hub, a structure designed by architects Nikolaus Hirsch and Michel Müller in New Delhi, did more than bring art to the people. "We bought a piece of land and that was enough to stop a group of people stealing the land from a group of people who had lived there for centuries," says Francesca. "This very small art project managed to transform the living and legal rights of 50,000 Indians."

Observers could hardly fail to notice that such a philanthropic ethos is at odds with that of her predecessors, who with the exception of her father locked away their art treasures and private homes. "In my family there were way too many egos and lots too much money, and people would contest each other for all the wrong reasons," says Francesca, whose elder half-brother Georg-Heini Jr, now 59, battled his father in the courts over the family trust in an epic Dynasty-style feud that lasted three years. The litigation, reckoned to have cost some £70 million in legal fees, caused the judge to resign, though not before commenting: "The amount of money that must have been wasted in this case is positively obscene."

"So when you come out of that world you really do not want to repeat the same mistakes and, God forbid, end up being like one of them," says Francesca. "One of my greatest fears is becoming one of those people I used to so despise."

Looking back, Francesca now realises that the one experience that really changed the way she viewed herself was her meeting with the Dalai Lama in 1985. "He encouraged me by saying that because I was born with a silver spoon in my mouth I must have done something good in my previous life and have good karma because of it," she says. "Because you are reincarnated into this position and because you have a good heart, you use these extra beneficial tools you have in order to do something good in this life."

After embracing the Dalai Lama's ethic, Francesca wasted no time in fulfilling his wisdom. In 1986 she organised an exhibition of Tibetan art at her father's estate in Lugarno, became a curator of her father's vast collection and then created ARCH, a foundation dedicated to saving the great artworks and heritage sites ravaged by the Bosnian conflict.

Since then she has used her position to champion art and artists who challenge the status quo politically and artistically. One such exhibition, The Question of Evidence, features work by a selection of artists that looks at the suppression of human rights, democratic reform, and attempts to restrict freedom of expression.

"As a long-term activist, one of the most potent uses of my voice is through the art projects, although not the entire mission is political," she clarifies. "Another of my objectives is to provide a platform for young artists who really push the boundaries. If you want to experience something new, then you have to drop your preconceptions and expectations, have some courage and explore the new."

Without a doubt, Francesca's quest for the fresh and the radical has brought her into direct conflict with members of the old guard, namely her stepmother, Baroness Carmen Thyssen Bornemisza, who rebuffed Francesca's request to present an exhibition of contemporary art in the family's gallery in Madrid. Francesca's plans included transforming the museum's entrance into a Tate Modern-style hall to feature an installation by Brazilian artist Ernesto Neto, thus disposing of a pair of humongous portraits of King Juan Carlos and Queen Sofia of Spain. Baroness Carmen won the case which, if reports are true, netted millions for a gaggle of British lawyers.

The fight against the conservative moral is a constant thorn in Francesca's side and she considers it her duty to fly the flag of invention.

"When you're upfront and trying to keep an edge in any creative industry you're likely not to have any support, as most people are threatened by the idea, especially those who are particularly dedicated to preserving the past," she says. "The art world is full of would-be contemporaries but they're all playing the game in the gallery system, participating in the art fairs and pushing artists to do saleable art rather than stretching themselves ... If you want to do something different then you are on your own. Such conservatism comes out of people's inability to make new decisions because they find clinging to old values has more merit and also protects them from having to make new decisions. It is extremely tedious for me to get conservatives to review their policies but it is something I have to do because what is called 'contemporary art' today is the standard of tomorrow. How else do we move on?"

With projects going on all simultaneously over the world Francesca von Habsburg, now aged 51, is regarded by many as a latter-day Gertrude Stein or Peggy Guggenheim, who respectively mentored Picasso and Jackson Pollock and without whom the face of 20th-century art would be very different. "I am happy to be compared with those great figures," she smiles. "But my trick has always been to facilitate and encourage the mingling of these disciplines so that they work together and that has always been my talent, whether it was throwing parties in London in the Eighties or running conservation projects in the Nineties or contemporary art in the 21st century."

Now that her recent exhibitions have graced the Mori Museum in Tokyo, The Haus Der Kunst in Munich and a succession of Venice Art Biennales, and while her work with Icelandic artists has won her the Order of the Falcon – the country's highest honour – some bystanders have assumed that she has left her party days behind her.

"For those who know, I'm still throwing great parties. I get really offended when people say I've grown up. I did marry into one of the most conservative families ever and to this day I have never done anything that has upset them and in 15 years of marriage that is pretty good going – apart from the fact that I live separately from my husband. What I have done is manage to have a family; I have three really great kids and have managed to integrate into my husband's life and I am very lucky in that respect.

"I am still that same person as I was in the Eighties. I haven't changed at all. Not one bit."

The opera 'No Night No Day' by Cerith Wyn Evans and Florian Hecker premieres on 4 June as part of the 53rd Venice Art Biennale. For more information, see tba21.org

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