As mentioned in a response from Sheikh Heera, composer.phar must be running with PHP 5.3 or higher.
What has not yet been mentioned is that composer.json contains several references to the PHP binary. When installing Laravel in an environment where PHP defaults to version lower than 5.3 (for example, WebFaction servers), all references to "php" in the composer.json file must be changed to indicate a newer version of PHP.
For instance:
"post-install-cmd": [ "php artisan optimize" ],
... need to be changed to (something like):
"post-install-cmd": [ "php54 artisan optimize" ],
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