This is a very confusing topic. I will try to be brief.

Why translate references at all? It is normally done in running text, but even in footnotes, even though some of these references will only ever be of use to a German law librarian, who will need them in German, not English. – So we will translate, to go with the flow.

Here is an example:

§ 812 Abs. 1 S. 1 1. Alt. BGB (I took this example from Simon and Funk-Baker’s Einführung in die deutsche Rechtssprache, referred to in an earlier entry).
To make it clearer, here is the text:

bq. Titel 26 – Ungerechtfertigte Bereicherung (§§ 812 – 822)
§ 812
Herausgabeanspruch
(1) Wer durch die Leistung eines anderen oder in sonstiger Weise auf dessen Kosten etwas ohne rechtlichen Grund erlangt, ist ihm zur Herausgabe verpflichtet. Diese Verpflichtung besteht auch dann, wenn der rechtliche Grund später wegfällt oder der mit einer Leistung nach dem Inhalt des Rechtsgeschäfts bezweckte Erfolg nicht eintritt.
(2) Als Leistung gilt auch die durch Vertrag erfolgte Anerkennung des Bestehens oder des Nichtbestehens eines Schuldverhältnisses.

(copied from dejure.org)

The first alternative in subsection 1 is the bit before the ‘oder’.

I would translate the reference in British English (BE) as

Section 812.1 sentence 1, first alternative, of the German Civil Code
or Section 812 (1) sentence 1, first alternative, of the German Civil Code
or Section 812 subsection 1 sentence 1, first alternative, of the German Civil CodeGerman statutes are divided into Paragrafen or Artikel. It’s usual to translate Artikel as article (sometimes capitalized, but let’s forget about that now).

In BE, Paragraf, or §, becomes section or s. , and Absatz becomes subsection.

It has become conventional to use section. The symbol § is not normally recognized as a paragraph symbol in English, except in mathematics. I have encountered translators who heatedly argue that the symbol is OK, but I think they are in the minority. As for myself, I’ve read it too often in German statutes to have an open mind. The paragraph symbol in English, both AmE and BE, is the one used in word-processing that looks like an abstract P, however.

In American English (AmE), § remains §, except at the beginning of a sentence, where Section is written, for § is the section symbol (it consists of two S’s).

I see no problem with translating Satz as sentence and Alternativ as alternative. The problem arises with Absatz.

In BE, sections have subsections, not paragraphs. A paragraph is a division in normal text, not in a statute. (The abbreviation ss. means sections – there is no abbreviation for subsection, but this doesn’t matter, since in running text we use no abbreviations – in footnotes the word can be avoided by writing .1 or (1) for Absatz 1.

In AmE, the word paragraph is more often used. It is a bit problematic, because in U.S. legislation it is sometimes used as an alternative to section. To quote Garner’s Dictionary of Modern Legal Usage:

bq. In drafting, a paragraph is a subdivision usually numbered for reference and sometimes, in citations, indicated by the character [reverse P]. The term can be confusing, however, because a drafted paragraph often consists of many individual paragraphs in the conventional sense of the word. At other times, it may consist of a two- or three-word phrase. When using cross-references, then, it is often more helpful to give the full citation – as, for example, by referring to “Rule 4(A)(4)(b)(ii).” That way, the terminology for each subdivision does not impede clarity.

If a Paragraf contains several Absätze, and an abbreviated citation is used, Absätze are given Roman figures and sentences Arabic figures:

§ 986 Absatz 1 Satz 2 BGB
or § 986 Abs. 1 S. 2 BGB
or § 986 I 2 BGB

(there is a space between § and the number, unlike in the Garner quote above).

This leaves the word Abschnitt, which means a larger section of a statute and is often translated section. It could be translated chapter, however.